Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

ROYAL FOUR TOWNS FISHING ORDER CONFIRMATION BILL

Read the Third time and passed.

PETITION

Wireless and Television (Programmes)

Mr. Dance: Mr. Speaker, I seek leave to introduce a Petition which represents the views of 365,355 members of the British public who are deeply concerned about the low standards of certain broadcasts and, in particular, television programmes, which are being screened at the present moment. I beg you, Mr. Speaker, to instruct the Clerk of the House to read this Petition to the House.

The CLERK (Sir BARNETT COCKS) read the Petition to the House as follows:
To: The Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled:
The humble Petition of residents of Bromsgrove and other places showeth, that on the walls of Broadcasting House is carved—
This temple of the Arts and Muses is dedicated to Almighty God by the first Governors of Broadcasting. It is their prayer that all things hostile to peace and purity be banished from this House, and that the people inclining their ear to whatsoever things are beautiful and honest and of good report may tread the paths of wisdom and righteousness.
That the men and women of Britain believe in a Christian way of life; Deplore present day attempts to belittle and destroy it, and in particular object to the propaganda of disbelief, doubt and dirt that the B.B.C. pours into millions of homes through the television screen; And that crime, violence, illegitimacy and venereal disease are steadily increasing, yet the B.B.C. employs people whose ideas and advice pander to the lowest in human nature, accompanying this with a stream of suggestive and erotic plays which present

promiscuity, infidelity and drinking as normal and inevitable.
Wherefore your Petitioners pray that the B.B.C. be asked to make a radical change of policy and produce programmes which build character instead of destroying it, which encourage and sustain faith in God and bring Him back to the heart of the British family and national life.
And your Petitioners, as in duty bound, will ever pray etc.
Petition to lie upon the Table.

Oral Answers to Questions — ECONOMIC AFFAIRS

North-West Economic Planning Council

Mr. Blaker: asked the First Secretary of State and Secretary of State for Economic Affairs what criteria he adopted in appointing the members of the Economic Planning Council for the North-West.

The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown): rose—

Hon. Members: Hear, hear.

Mr. Brown: I am glad to see right hon. and hon. Gentlemen in their places.
The Answer is that I appointed those people who seemed to me best able to contribute to economic planning within the region.

Mr. Blaker: Is it a fact that all the members of the Council who are also elected members of local authorities are supporters of the Labour Party? If so, does the right hon. Gentleman think that this is giving fair representation to all the interests of the region, which is what he undertook to do?

Mr. Brown: Offhand I cannot say; I do not know. As a matter of fact, the members of local authorities are chosen by me from a list nominated by associations of local authorities.

Inland Letter Post

Mr. Stratton Mills: asked the First Secretary of State and Secretary of State for Economic Affairs if he will ask the Price Review Body to examine the proposed increase in the price of the 3d. inland letter post.

Mr. George Brown: No, Sir. As we explained in the debate on postal services on 30th March, we have conducted an exhaustive examination of Post Office finances. I should be delighted if all private industry could stand up as well to a similar scrutiny.

Mr. Stratton Mills: We recognise the right hon. Gentleman's desire to promote a better atmosphere between Government arid industry, but does he realise that this would be greatly helped if he gave an assurance that either this or some other price increase in the public sector could be put before this body for close and detailed scrutiny?

Mr. Brown: I have given my reasons for not sending this one, and I still think that they are good and sound reasons; but I have always made absolutely clear that I do not rule out sending a case in the public sector, and, if circumstances at any stage seem to warrant it, I shall do so.

Mr. Gibson-Watt: Will the right hon. Gentleman look at the matter again? Is he aware that the public are not getting value for money in the service at the moment and that, in spite of the raising of the letter postage rate by the Postmaster-General over three weeks ago, there are still areas in the country where there is a grave shortage of postage stamps? Will he ask his right hon. Friend to look into it?

Mr. Brown: I am sure that the hon. Gentleman will find ways and means of putting that to my right hon. Friend. I am bound to record that, in my view, the public get very good service from the Post Office.

Central and Regional Planning (Industrialists)

Mr. Bruce-Gardyne: asked the First Secretary of State and Secretary of State for Economic Affairs how many industrialists are currently serving on central and regional planning bodies established by his Department, or otherwise assisting his Department in a part-time or unpaid advisory capacity; and what is the total number of man-hours which they may expect to devote to this work during the course of a full year.

Mr. George Brown: Two hundred and seventy-eight. I am happy to say that

they are willingly giving all the time the national interest requires.

Mr. Bruce-Gardyne: I am grateful to the right hon. Gentleman for answering the Question, which I put down two months ago and which he chose not to answer on that occasion, but will he agree that all these people might well be better employed getting on with their jobs and producing more goods for export instead of being engaged in flatulent discussions with the right hon. Gentleman?

Mr. Brown: I leave the hon. Gentleman to work out his own views about the flatulence of industrialists between himself and them.

Mr. Bruce-Gardyne: Will the right hon. Gentleman kindly answer the question, which I put to him for the second time?

Mr. Speaker: Mr. Bruce-Gardyne—Question No. 5.

Mr. Bruce-Gardyne: On a point of order, Mr. Speaker. I have put this question twice to the right hon. Gentleman, and on each occasion he has chosen to evade an answer.

Mr. Speaker: I do not understand what the hon. Gentleman is doing. It does not raise any point of order.

National Board for Prices and Incomes (References)

Mr. Bruce-Gardyne: asked the First Secretary of State and Secretary of State for Economic Affairs whether he intends to refer wage awards resulting from arbitration procedures and independent committees of inquiry to the National Board for Prices and Incomes in any cases where such awards are regarded by the Government as potentially inflationary.

Mr. George Brown: The Government will refer any questions relating to prices, wages and other money incomes which they consider it desirable to have investigated in the national interest.

Mr. Bruce-Gardyne: Does this mean that the Government are prepared to refer decisions of arbitration tribunals and other bodies of this kind to the National Board for Prices and Incomes and, if so, will the right hon. Gentleman agree that his Answer, in conjunction


with the comments of the printers' union about the activities of the Government over their wage claim, would suggest that it is time that he and his right hon. Friends apologised to my right hon. Friends for their strictures on their attempts when in Government to intervene in wage bargaining?

Mr. Ronald Bell: Does the First Secretary realise that he faces a very complicated problem here? Is it his intention to refer pay claims to the Board before they go to these arbitral or other agreed procedures, during the procedures or after award, or is it his intention that this wide range of industrial claims should be excluded from his incomes policy?

Mr. Brown: I am much obliged to the hon. Gentleman for the way in which he puts his question. It is a very complicated matter. If one rules out moving in any particular area, one only limits the possibility of helping. I would not normally think it a good thing to intervene at any stage while the normal procedures are proceeding; but, of course, there may be an occasion when, at some stage, it would be wiser to do it then than to wait until later. Therefore, with the agreement of both management and unions, the series of White Papers was written in such a form as to leave a fairly wide discretion to the Minister as to when, how and if he should move.

Mr. Orme: Could the doctors' proposals come within the terms of such reference?

Mr. Brown: They certainly could. Whether they will is another matter.

Sir E. Brown: Has the right hon. Gentleman consulted the Minister of Labour on this particular application?

Mr. Brown: All members of this Government consult each other almost all the time.

Mr. Heath: The First Secretary said that he would not normally think it desirable to intervene, as I understand it, while a claim was being considered. There remains the further point raised by my hon. Friend as to whether hewould refer a case which had already been to arbitration or to some other form of committee of inquiry which had given its view but which the Government considered

had resulted in an inflationary increase which was unjustifiable. Has he given throught to whether he would be prepared to refer that to the Board?

Mr. Brown: It might not only be because we thought it inflationary, but there might be other reasons in the public interest why one would like it to be looked at, and one has the power to do so in any circumstances when one thinks it right.

Mr. Emrys Hughes: Is my right hon. Friend aware that many small farmers are aggrieved because of recent increases in their rents, and will he consider submitting cases of landlords' incomes to the Board?

Mr. Brown: It sounds a very interesting proposal. I should like to hear rather more of it.

Mr. Bruce-Gardyne: In view of the totally unsatisfactory nature of the replies to both my Questions, I beg to give notice that I shall seek leave to raise the matter on the Adjournment at the earliest opportunity.

Mr. Ridsdale: asked the First Secretary of State and Secretary of State for Economic Affairs how many cases of price and wage increases, respectively, have now been referred to the Price Review Board.

Mr. George Brown: Four, Sir. All, of course, involve all considerations affecting price increases.

Mr. Ridsdale: Will the Frst Secretary refer the recent large increase made by the London Electricity Board to the National Board for Prices and Incomes? Why is he being so complacent, particularly as price rises in the last six months have been the equivalent of nearly 8 per cent. annually, or £1 a week for the average family?

Mr. Speaker: There is a danger of overlapping another Question about electricity prices. There is a later Question, No. 24, about that.

Mr. Brown: I have already referred to the question of referring the prices of nationalised undertakings, and there will be other Questions on that. I shall consider the particular point which the hon. Gentleman raises.

Mr. Ronald Bell: The First Secretary gave the figure as four. My hon. Friend's Question asked for the cases of price and wage increases respectively. Has the right hon. Gentleman separate figures for those? Does he recognise the danger that his incomes policy, because of the difficulty of referring wage increases—I raised this point in a supplementary question to Question No. 5—may come to rely increasingly on control of prices?

Mr. Brown: I have always made quite clear that my view—I think that it is the view of most other people who have seriously considered it—is that if one can get price stability one has the only climate in which one can hope to have an incomes policy. Therefore, in what is inevitably something of a "chicken and egg" operation, if one has to decide on somewhere to start, prices are the right place. But I have not referred only prices, as the hon. Gentleman knows. I shall consider them all. In any case, it is a slightly non-meaningful distinction because, even in dealing with prices, the question of costs must be taken into account, and costs by definition must include wages and other considerations of that kind. So in no case could one really say that this is dealing only with prices and that is dealing only with incomes. That is why I answered as I did and said that all considerations apply equally in a sense to all cases.

Mr. Fisher: asked the First Secretary of State and Secretary of State for Economic Affairs whether he will refer to the Prices and Incomes Board the cost of rail and bus fares, coal and coke, electricity, inland postage and house mortgages.

Mr. Buchanan-Smith: asked the First Secretary of State and Secretary of State for Economic Affairs if he is aware of increases in freight charges on British Railways; and if he will refer these to the National Board for Incomes and Prices.

Mr. George Brown: No, Sir. I made it clear in the debate on 11th May that we would not hesitate to refer a nationalised industry case to the National Board for Prices and Incomes if the circumstances made this desirable. But I do not think

that it would be helpful to refer the cases mentioned by the hon. Members.

Mr. Fisher: Would not the right hon. Gentleman agree that fares and the cost of fuel and mortgage interest rates are much more significant items in most people's personal budgets than the soap, flour and detergent which he has selected for examination?

Mr. Brown: It is a matter of opinion. On the question of mortgage rates, the hon. Gentleman will know that my right hon. Friend the Minister of Housing and Local Government explained the work that we are doing to get a national housing plan which would deal with them. Right hon. and hon. Members may have noticed an announcement today which is not without some significance in this respect. I notice that when Bank Rate comes down, we do not hear very much about it from right hon. and hon. Members opposite. I took the cases which the hon. Gentleman mentioned into account but for a variety of reasons I came to the conclusion that they were not the best ones to start with.

Mr. Buchanan-Smith: Is the right hon. Gentleman aware that in certain parts of Scotland there is no alternative to consigning fish other than by British Railways? Increases in consignment rates for fish could raise the price of fish and bear badly on the consumer.

Mr. Brown: Without accepting necessarily that all that is accurate, I shall be glad to look at the matter if the hon. Gentleman will write to me.

Mr. loan L. Evans: In view of the announcement today of the reduction in Bank Rate, will my right hon. Friend refer the question of mortgages to the Prices and Incomes Board? When Bank Rate was increased, it was argued that this was the reason for the increase in mortgage rates. Should not there now be a reduction?

Mr. Brown: I should think that this afternoon would be a bit early, but I will keep it in mind.

Mr. Buchanan-Smith: On a point of order. The right hon. Gentleman said that he would listen to my point if I wrote to him. I wrote to him over a week ago.

Mr. Brown: In that case, I must be listening.

Mr. Speaker: The right hon. Gentleman will be able to listen in a correspondential sense.

Mr. Higgins: The right hon. Gentleman says that this is a matter of opinion. As he is using the input-output analysis mentioned in Question No. 23, would not he agree that this is not a matter of opinion? My hon. Friend is right and he is wrong.

Mr. Brown: The one thing that the use of input-output analysis will not do for us is enable us to make a judgment on the decision. I have made one judgment, the hon. Gentleman has made another. It is a matter of opinion as to who is right.

Economic Planning Boards (Offices and Staff)

Mr. Shepherd: asked the First Secretary of State and Secretary of State for Economic Affairs what is the total floor area of the offices to be occupied by the regional economic planning boards; and what is the total number of staff it is intended to employ.

Mr. George Brown: Sixteen thousand, two hundred and eighteen sq. ft. and 77, respectively.

Mr. Shepherd: Is not this a rather large floor area? What steps does the right hon. Gentleman take to try to keep these areas and numbers within bounds?

Mr. Brown: A great number of steps; and, in fact, much of this represents the bringing together of civil servants who are now scattered over a large number of offices. This will, therefore, make for much greater efficiency.

Mr. Alan Williams: Will my right hon. Friend take it that the people of Wales—I am sure that this applies to other regions which need development—will welcome the setting up of planning machinery and that we shall happily accept the need for further offices and further staff if it means that we shall no longer have to put up with the haphazard development we had under the previous Government?

Mr. Brown: I am very grateful to my hon. Friend.

Short Brothers and Harland

Sir Knox Cunningham: asked the First Secretary of State and Secretary of State for Economic Affairs what progress has been made in the diversification of Short Brothers and Harland's operations; what are the names of the consultants whom he has appointed to advise him; and when he will be in a position to act on their advice.

Mr. Pounder: asked the First Secretary of State and Secretary of State for Economic Affairs if he has yet received the consultants' report on the future of Short Brothers and Harland, Belfast; and when he will make an announcement.

Mr. McMaster: asked the First Secretary of State and Secretary of State for Economic Affairs if he will give the details of the background and experience of the firm of Messrs. Arthur D. Little, consultants, which led him to appoint them to review the affairs of Short Brothers and Harland.

Mr. Kilfedder: asked the First Secretary of State and Secretary of State for Economic Affairs when he expects to receive the consultants' report on Short Brothers and Harland, Belfast.

Mr. George Brown: May I, with your permission, Mr. Speaker, preface this Answer by thanking the hon. and learned Member for Antrim, South (Sir Knox Cunningham) for protecting me from his hon. Friends last week.
Messrs. Arthur D. Little have been appointed. They will take about six months to complete their report. They were chosen for two main reasons: their considerable experience of the diversification of the activities of companies in the aircraft field; and their knowledge of Northern Ireland through the work they were commissioned to do in 1959 by the Northern Ireland Development Council.

Sir Knox Cunningham: Will the right hon. Gentleman be making the report public, and, since the review will not affect the position which is being considered by the Plowden Committee, will he state whether he has any further orders for aircraft for Shorts in the offing?

Mr. Brown: On the latter point, the hon. and learned Gentleman will know that I made a fairly full statement at Shorts last week, which received widespread publicity, and I do not think I need add to that or go beyond it. On his first point, I think that, before actually committing myself to publication of the full report—after all, the consultants were brought in with the agreement of the company—we had better await the nature of the report and decide then whether it is the right sort of thing to publish or not.

Mr. Chichester-Clark: But without waiting for the consultants' report, will the right hon. Gentleman, for the benefit of American competitors and others, reiterate the pledge he gave about Shorts, that the company would remain in the aircraft industry and will thus be fully able to meet its present and future commitments'?

Mr. Brown: Certainly. The Minister of Aviation has said this. I said it in Northern Ireland. I repeat it here now. I think that it would be very good for Shorts, and for Northern Ireland, if there were diversification of its interests and if it were not linked to this one form of enterprise; but, having said that, we have both of us made clear—using exactly the same words—that Shorts is in the aircraft industry, it will remain part of the aircraft industry, and anyone who has bought or is thinking of buying any of its excellent products can be quite sure that the company will be able to fulfil all its after-sales service and so on.

Sir A. V. Harvey: Will the right hon. Gentleman take into account that a firm like Shorts cannot diversify for several years and the company will go through a very difficult period in the intervening time? Does he still hold the view that the Shorts plant is suitable for diversification for machine tools? No one else does.

Mr. Brown: Shall we wait and see what the consultants say?

East Anglia (Economic Planning Region)

Mr. Norwood: asked the First Secretary of State and Secretary of State for Economic Affairs if he has decided the boundaries of the Economic Planning Region for East Anglia; and if he will make a statement.

Mr. George Brown: I am still considering the form of planning machinery best suited to the needs of the area covered by the previous Government's South East Study. I shall announce my conclusions as soon as I possibly can.

Mr. Norwood: I am aware of my right hon. Friend's problem in dealing with the very wide area covered by the South East Study, but will he accept that there is tremendous concern in Norfolk and East Anglia in general about the boundaries of the region? May I suggest that he considers a region which would cover the portion of East Anglia as it is generally understood by the people living there?

Mr. Brown: I am well aware of the views of people in East Anglia as I am well aware of my hon. Friend's views. Without going beyond the Answer I have given, my hon. Friend can take it that that is very much one of the questions I am now considering.

Mr. Eldon Griffiths: Will the right hon. Gentleman take plenty of time before he sets out his ideas on the future planning of East Anglia and have regard to the subtle inter-relations of agriculture, the countryside, industry and the rest, because, with respect, most people in East Anglia have no confidence in his ability to plan for East Anglia or anywhere else?

Mr. Brown: I thank the hon. Gentleman for the pleasantry. We shall take as much time as making a sensible decision requires, but I am sure I can promise him that we shall have it done before we go to the country in 1969.

North-East Region

Mr. Rhodes: asked the First Secretary of State and Secretary of State for Economic Affairs what are his current plans for the further economic regeneration of the North-East Region.

Mr. George Brown: The Economic Planning Council has already started work with a view to preparing a comprehensive development plan for the Northern Region.

Mr. Rhodes: Will my right hon. Friend bear in mind that in spite of


the excellent progress in recent months there are still certain underlying weaknesses in the economy of the North-East, and, in view of that fact will he, as the responsible Minister, give every encouragement to those motor car manufacturers who have made inquiries in this area, to encourage them to establish plant which is so badly needed?

Mr. Brown: As my hon. Friend knows, I was up there very recently myself, and I had a good look at what was going on. I think we have to be very careful not to sound too gloomy about the North-East region—

Dame Irene Ward: Hear, hear.

Mr. Brown: —for although there are many problems still to be settled, nevertheless it is an encouraging and thriving place. Of course there is a lot more to be done and we shall certainly bear in mind all the very real points my hon. Friend has made.

Dame Irene Ward: Would the right hon. Gentleman, in his efforts to help the North-East Coast—I am glad he enjoyed his visit there—advise the Chancellor of the Exchequer to abandon Corporation Tax and will he also advise him to accept our Amendments to the Finance Bill about shipping interests?

Mr. Brown: A good deal of that supplementary question hardly seems to arise out of this Question, but I am glad to say how much the hon. Lady's attendance at the cocktail party added to my enjoyment of my visit.

Mr. Heath: Will the right hon. Gentleman give up the ridiculous pretence that for the first time he is bringing into action a planning group for the North-East? That group was brought into action two years ago by my right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg); a White Paper was published and received the approval of this House. The whole process was implemented then, and the prosperity of the North-East at the moment owes an enormous amount to it. It would be a help if he were to give a clearer picture of the situation and if he took more responsibility for the work he is trying to do himself.

Mr. Brown: I am much obliged to the right hon. Gentleman. As a matter of faot, I have always been willing to pay tribute to such work as was done before we came in and on which we were able to build. I wish I could say as much of the attitude of the right hon. Gentleman to the work we have been doing since.

Dame Irene Ward: What has the right hon. Gentleman done?

Several Hon. Members: rose—

Mr. Speaker: Much as I should like to call other hon. Members on the Question, we are making such slow progress with Questions that I think we had better get on.

Nationalised Industries (Coal)

Mr. Marten: asked the First Secretary of State and Secretary of State for Economic Affairs what effect he estimates that the increased use by nationalised industries of coal rather than oil will have on the stability of prices.

Mr. George Brown: None, Sir.

Mr. Marten: If that is so, which is a very surprising answer, is it not true that, if the Minister of Power had not made his statement giving preference to coal, the nationalised industries might have reduced their prices? Is this not in direct conflict with the right hon. Gentleman's policy for prices and incomes?

Mr. Brown: That is a different question from the one put down. We have gone into this very carefully and the answer is the one I gave the hon. Gentleman: none.

Mr. Alan Williams: When considering the effect of this decision on the stability of prices, will my hon. Friend also consider what the impact on the balance of payments will be of using domestic fuel instead of imported fuel?

Mr. Brown: There are, of course, a great many factors to be taken into account here. We could not do without a coal industry altogether. If we eat too much into it the cost of what remains will be very high indeed. There are many factors to be balanced and we have tried to balance them. In doing that we took the decision we recently made.

Industry (Consultation)

Mr. Sheldon: asked the First Secretary of State and Secretary of State for Economic Affairs what action he will take to encourage the co-operation of industry in fulfilling the Government's long-term development plan.

Sir C. Osborne: asked the First Secretary of State and Secretary of State for Economic Affairs how soon he expects to achieve his policy of ending restrictive practices, demarcation disputes, using more labour than is necessary, the under-use of machinery, and the refusal to use modern techniques; if he will set out in detail the steps he has taken already to achieve those conditions; and if he will make a statement.

Mr. George Brown: I intend to continue and enlarge the process of consultation with both sides of industry through the medium of the National Economic Development Council and the little Neddies. It would not be sensible however to put a timetable on the complex task confronting us, which will require determined effort by the Government and by both sides of industry at all levels. I am today publishing in the OFFICIAL REPORT and placing in the Library copies of a note which will, I hope, give hon. Members a clear picture of the interrelationship between the Government's industrial policies and the development plan.

Mr. Sheldon: While thanking the right hon. Gentleman for that reply, may I ask him if he is aware of the gross misrepresentation of Governmental economic policy in the past few weeks, obviously politically inspired? Is he further aware that this misrepresentation is bound to recur to an even greater degree on publication of this plan, so will he take steps to combat this?

Mr. Brown: I tried to reply very quickly to the last manifestation, but one of the things which always occurs to me is this; every time I go into the country I find a great difference between the attitude of industrialists and businessmen out there and that of those who in here pretend to represent them.

Sir C. Osborne: As one who has always supported the right hon. Gentleman's policy and hoped he would succeed for

the nation's sake, may I ask him this? What hope has he really got of his policy being accepted at the shop floor level, and what steps can he take to stop the foolish unofficial strikes we have seen very recently from holding up production?

Mr. Brown: We suffer from more than one foolish move in industry and on more than one side. I have every hope that the policy will succeed, and it is the more likely to the more it is recognised that it is not my policy or the Government's policy but the policy which management and the unions and the Government have accepted.

Mr. Patrick Jenkin: With reference to the right hon. Gentleman's supplementary answer to his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), is he aware that the remarks which he made in reply to the Institute of Directors provokes the question, "Who feeds whom?"

Mr. Brown: To answer that very interesting question would keep me going on for a very long time.

Mr. Ronald Bell: Does the right hon. Gentleman realise that there is a growing anxiety because of the fact that the Government's fiscal and legislative policy appears to be designed primarily to placate the trade unions in the hope that they will respond by a diminution of militancy in pay claims and by the abandonment of restrictive practices, and that no perceptible response in either of those two spheres has yet manifested itself? Will he address himself to this basic defect in his incomes policy?

Mr. Brown: That description of the Government's fiscal and other policies I would not accept, and the hon. Gentleman's last comment is inaccurate and will also be unhelpful. It is no use telling people who are trying to do their best in difficult circumstances that we do not believe they are doing their best. It would be better to give them a bit of encouragement, I would have thought.

Following is the note:

INDUSTRIAL POLICIES AND THE PLAN

1. The Government's industrial policies and the economic Plan are complementary means to a common end—the achievement of a sustained high level of economic growth and


employment. Industry must operate at maximum efficiency and competitiveness. To do this it needs all relevant information on the development of its markets, and the capital and skills which will be required to serve them. This the Plan for economic growth provides.

2. The Plan, which is being prepared by Government in consultation with both sides of industry, will form a firm basis for investment, expansion, modernisation and greater international competitiveness. It will provide information on the likely development of markets, of the projected rate of expansion of different industries and on Government industrial policies. Such information should help management to plan ahead with greater confidence. The Plan will also provide a framework in which the Government can arrange its own expenditure. Work on the Plan should help to identify particular problems in the way of faster growth and suggest means of tackling them.

3. The task of the Economic Development Committees is to encourage a better use of our industrial resources. They have therefore been involved in the discussions on the Plan and on its implications for their particular industries. This "dialogue" constitutes one of the major functions of the E.D.C.s and will continue after the publication of the Plan. Consultations are also taking place with other industries not yet covered by E.D.C.s.

4. The Plan is not a rigid blueprint nor an infallible guide to the future. It is, however, a useful yardstick against which progress can be measured and difficulties diagnosed. The individual figures will almost certainly be revised and adjusted, but not the main objectives, which are to be clearly stated in the published Plan.

5. Action to bring about a lasting improvement in the balance of payments is the first priority. The measures which the Government has already taken to bring this about will provide a basis for further advance. For only if British industry is fully competitive in world markets will it be possible to achieve a faster rate of growth.

6. The need to sharpen our competitive ability was recognised in the Joint Statement of Intent on Productivity, Prices and Incomes signed by the Government with both sides of industry last December. The prices and incomes policy and the machinery for giving it effect, worked out with both sides of industry, is intended to combat the tendency for incomes to rise faster than productivity. In addition, the two sides pledged themselves "to encourage and lead a sustained attack on the obstacles to efficiency, whether on the part of management or workers, and to strive for the adoption of more rigorous standards of performance at all levels".

7. This involves a faster adoption of proved new methods and techniques by all engaged in industry. Workers will more readily accept change if they see that opportunities are being provided for training in new skills and that jobs are available in all parts of the country. The preliminary work on the Plan has already revealed that labour is likely to be short over the next few years if the growth rates anticipated

by industry are to be achieved. This suggests:

(a) The need for a stronger regional policy to obtain balanced development of all areas in the country and the fuller use of resources. The newly created Regional Councils and Boards will be responsible for this policy.
(b) The need for an increase in both the quality and the quantity of productive investment. The N.E.D.C., in its report on "Investment Appraisal", which has had a very good sale throughout industry, has given valuable advice to industry on new techniques for assessing the profitability of capital projects.
(c) The need for better use of labour. There is need for greater mobility, so that people move to those industries and occupations where they can make the best use of their skills. Industrial Training Boards covering the bulk of industry and commerce are being set up under the 1964 Industrial Training Act, and a major expansion of Government Training Centres has been started. Legislation on redundancy payments is now before Parliament, unemployment benefit has been improved, and wage related benefits are under consideration. Industry is being encouraged to forecast requirements of manpower further ahead.

8. These national policies will affect the performance and prospects of each individual industry. But the problems of industrial efficiency must also be tackled at the level of individual industries and firms. This is another function of the E.D.C.s or "Little Neddies". The E.D.C.s, like the N.E.D.C., contain representatives of management, trade unions and Government, as well as independent members. There are at present nine E.D.C.s and a further four are in process of formation. I hope to increase the total number to about twenty, covering the great bulk of employment in the private sector of the economy before the end of the year.

9. The priorities for the "Little Neddies" vary from industry to industry. Nevertheless, some common priorities have emerged. In addition to work on the Plan, many E.D.C.s have studied in detail the extent and causes of imports of the various products of their industries. This has shown the need for more investment to provide for our own markets and the need to improve in other ways the competitive position of individual industries. A study of ways of making British industry more competitive with imported products, arising out of the work of the "Little Neddies" has now been considered by the N.E.D.C. Meanwhile the E.D.C.s themselves have evolved Action Programmes to reduce the volume of imports in their industries. Programmes agreed by the Machine Tools, Chemicals and Mechanical Engineering E.D.C.s include specific recommendations to bring about improvements in design, increases in productive capacity, better links between suppliers and customers, a more efficient industrial structure and Government action to encourage investment. These measures which lie within the Government's responsibility are being urgently studied.

10. The E.D.C.s are also undertaking detailed studies of manpower problems. They are working for ways of extending productivity bargaining, on the lines of recent agreements in a number of industries. Such agreements have allowed increases in productivity, relaxations of job demarcations, a more effective deployment of labour and drastic reductions in overtime, while at the same time guaranteeing a reasonable security of employment for the workers involved and providing higher earnings.

11. The "Little Neddies" are giving urgent attention to standardisation and specialisation in order to achieve economic production runs. Increased production can only come in the short run from higher output from the same men and machines, and standardisation and specialisation are in turn the quickest way of achieving this higher output, combined with lower costs and prices. This will require detailed discussion in each E.D.C. and in subcommittees for separate sectors.

12. Some E.D.C.s have now turned from the study of imports to a study of methods increasing exports in their industries, and others will shorty follow. Other subjects under consideration include ways of improving market research, technical research and development, design and training and stock control. The priorities vary with the structure, markets and production processes of each industry. There are many areas where there is scope for more co-operation inside industry, and between industry and Government, subject to the disciplines of the market economy.

13. The framework within which the work of the E.D.C.s is taking place is the National Plan. Despite the complications and the detailed discussions involved, the Government are determined to have the Plan ready by the end of the summer so that everyone concerned can he aware of the aim and the means proposed for achieving it.

South East Study

Mr. Boston: asked the First Secretary of State and Secretary of State for Economic Affairs what progress he has made with his review of the South East Study; and if he will now make a statement.

Mr. George Brown: Good progress is being made but I cannot yet give a date when the review will be completed.

Mr. Boston: Is my right hon. Friend in a position to give some indication when the review is likely to be completed? Would he also bear in mind the suggestion of giving sympathetic consideration to the representations made by Kent County Council and other local authorities in Kent, especially in view of the fact that they were thoroughly dissatisfied with the previous Government's South East Study and are, therefore, very glad that

this new opportunity is being taken of having a new look at the policy?

Mr. Brown: Certainly this is one of the questions which is very much in mind. It would, I think, unduly tie my hands to try to give a date now.

Mr. Peter Emery: Will the right hon. Gentleman realise that much expansion and, indeed, considerable housing development in this area is being delayed till he makes a statement? Could he not give a pledge to the local authorities in this area that they can have something from his Department before the Summer Recess?

Mr. Brown: The hon. Gentleman must have missed the fact that on 3rd February my right hon. Friend the Minister for Housing and Local Government announced some interim proposals to deal with the problem he has in mind.

Wages and Salaries

Sir C. Osborne: asked the First Secretary of State and Secretary of State for Economic Affairs in view of the large wage increases granted since his policy of income and price restraint was announced, and as printers are demanding another 7 per cent. to 13 per cent. increase, miners 12 per cent., railwaymen 61 per cent., train crews 18 per cent., teachers 35 per cent. to 42 per cent., and London busmen 9 per cent., if he will now abandon his policy of a 31½ per cent. annual increase; and if he will make a statement.

Mr. George Brown: This is not, as I pointed out in my Supplementary reply on a previous Question, my policy alone. It is that of management, of unions, and of Government. We must all fight to make it effective.

Sir C. Osborne: If these increased figures of salaries and wages are to continue to be granted without any further productivity, will not the right hon. Gentleman try to make the whole nation—every section of it—realise that the Continental type of inflation will be inevitable, which would make War Loan and National Savings Certificates as valueless as the old German pre-war bonds? Would he not try to impress this upon the whole nation?

Mr. Brown: I am impressing it on the whole nation, and I think the hon. Member is doing his best. I suggest he has a word with his own Front Bench.

Mr. Harold Walker: Is not my right hon. Friend aware by now that hon. and right hon. Members on the other side of the House are obsessed with talking about wage increases but not with increases in directors' remuneration and that it is precisely this attitude which inflames and antagonises the men on the workshop floor? I speak with first-hand experience, unlike hon. and right hon. Members opposite.

Mr. Brown: Yes, I am well aware and recognise that there is a serious problem here, as does everybody who is seriously looking at it. One of the weaknesses is that people are in the habit of looking at a problem from their point of view, and not from the other chap's point of view, of what he should do about it. We should adopt a new attitude.

Mr. Heath: Is the right hon. Gentleman aware that the whole tone of his answers has changed considerably even in the last month? Until then he was boasting about his policy. Now that it is proving to be ineffective he is trying to spread the blame to other people, even to the Opposition Front Bench, though that policy has been openly rejected by his own trade union. In the general interest will he not take the responsibility upon himself?

Mr. Brown: When the trade union of which I am proud to be a member took the decision to disagree with me publicly I stood up to them, and I recommend the same attitude to the right hon. Gentleman.

Sir C. Osborne: I beg to give notice that I should like to raise the matter on the Adjournment, with your permission, Mr. Speaker.

Mr. Awdry: asked the First Secretary of State and Secretary of State for Economic Affairs how many manual and salaried workers are at present covered by outstanding pay and hours claims; and what proportion he proposes to refer to the National Board for Prices and Incomes.

Mr. George Brown: At the end of last week claims for pay increases or hours

reductions, or both, were known to be outstanding for about 2,160,000 manual workers, and about 1,340,000 salaried workers. I am currently considering what further cases of prices as well as incomes, should be referred to the Board.

Mr. Awdry: Will the right hon. Gentleman agree that these recent increases in wages are far greater than any possible, conceivable increase in prices? Would it not be much wiser to tackle this question of wages instead of merely tackling the question of prices?

Mr. Brown: I feel the hon. Gentleman could not have heard or taken in the Answer I gave just now. Precisely so long as we all go on attacking the other side and not taking a balanced view so long shall we have difficulty in applying the policy to prices. I heard an hon. Member opposite say "Scrap the Board". That is the view of hon. Members opposite, but not, of course, the view of industry itself, not management nor unions. Prices have risen as well as incomes, and incomes of all kinds as well as wages—fees of all kinds as well as wages. We have got to get them looked at and that is what we are trying to do.

Mr. Ogden: Are not a great many of the wage claims being submitted in fact being based upon increased productivity?

Mr. Brown: There clearly are cases in which that is so. Let us remember that the purpose of the policy, unlike some of those previously, is not to enforce restraint. The purpose of this policy is to achieve expansion and more productivity under which we can enjoy real higher incomes.

Mr. Ronald Bell: No one doubts the difficulty, but the question I want to ask the right hon. Gentleman is this. Does he himself detect any lessening of militancy in the presentation of claims—that is the crux of the matter—and if not, what is he going to do about it?

Mr. Brown: There have been recent examples where quite clearly the trade unions have been showing a great deal of restraint, and the hon. Member must be aware of them. I do not want to mention any names individually, for that would be invidious, but there have been outstanding examples which ought to be applauded.

Mr. McMaster: asked the First Secretary of State and Secretary of State for Economic Affairs what general principles he follows in deciding whether to refer a wage or salary agreement which exceeds the 3½ per cent. norm to the Incomes and Prices Commission.

Mr. George Brown: I consider whether an investigation on a particular case would be in the national interest because of its importance for the economy: or for the parties concerned: or because it raises issues which are of general interest.

Mr. McMaster: Will the right hon. Gentleman, because of the importance of these references, not consider being tougher here and let it be known that, irrespective of what has gone on before, what will happen in future is that any increases over 3½ per cent. will automatically be referred to the Board?

Mr. Brown: That would be the wrong way to go about it. The 3½ per cent. is an overall figure applying to personal incomes of all kinds. The overall rise in gross domestic production does not mean one cannot have much higher wages for special cases for the reasons set out in the Declaration of Intent. As for my being tough, from some of the things I have read about myself it would seem that there are some people who think that I have been a little too tough.

Mr. Edward M. Taylor: Would the right hon. Gentleman agree that the whole future of the Board and its ability to deal with such cases has been put at risk by the report last night of a confidential circular issued by the secretary of one of the printing unions in which alarming allegations were made of crude intervention by the Minister in the course of negotiations in which it is alleged that the Minister advised the employers not to settle and suggested that the printers were already over paid?

Mr. Brown: I am obliged to the hon. Gentleman for giving me the chance to deal with that matter. Obviously, a Minister in a job like mine must from time to time have talks both with the management and with the unions on a confidential basis. That does not involve interference. On the whole, I find that it is welcome when they think that it is helpful and sometimes not so wecome

when they think that it is not helpful. But these talks must go on, otherwise the job cannot be done, and people should respect confidence when they ask for confidential talks.

South-West Regional Headquarters

Sir H. Studholme: asked the First Secretary of State and Secretary of State for Economic Affairs if he will now state the estimated cost of the proposed new Regional Headquarters for the South-West at Bristol, the estimated annual cost of running it, and the number of extra civil servants required.

Mr. George Brown: The cost of the headquarters—[Horn. MEMBERS: "Hear, hear."]—I hope that I make take the cheers for the arrival of my right hon. Friend the Prime Minister as a joint greeting.
The cost of the headquarters will depend on negotiations now in progress. My Department will account for about 15 new staff.

Sir H. Studholme: Is not the First Secretary's Answer rather extraordinary? Would not one have thought that he, like any private organisation or industry not bolstered up by the taxpayer, would have gone into all these things most carefully before embarking on this scheme?

Mr. Brown: I gather that what the hon. Gentleman finds extraordinary about my Answer is that it was not the one which he thought I would make; but it is the accurate one.

Mr. Robert Cooke: Is it a fact that Bristol is the most expensive possible place to have this regional headquarters?

Mr. Brown: No, but we discussed the question of whether it should be in some other town in the South-West than Bristol the last time that I answered Questions. My view remains the same: that this is the proper place to put it.

Mr. Bessell: Will the right hon. Gentle, man bear in mind the reply which he gave when we last discussed this matter when he said that he would consider having a separate headquarters in Plymouth for the extreme South-West?

Mr. Brown: I do not think that I referred to a separate headquarters, but I said that I would consider a separate


sub-regional organisation. That is in my mind—if it is the wish of the people in the South-West.

South-West (Economic Development)

Mr. Peter Mills: asked the First Secretary of State and Secretary of State for Economic Affairs what decisions the new Economic Planning Council for the South-West have taken as regards the economic development in the South-West.

Mr. George Brown: The Council has held only one meeting and it is therefore too early for it to have formulated advice on economic development within the region.

Mr. Mills: Would not the Minister agree that one decision which the Council could make, and fairly urgently, is to reverse the decision of the Board of Trade which has refused industrial development certificates to small companies to come to the South-West? As the small companies are vital for economic progress, will the Council be able to do something about the matter?

Mr. Brown: If the hon. Gentleman has a specific case and he would like to refer it to my right hon. Friend or myself, we will consider it. Now that we have the Council in the region, this is a first-class piece of machinery to use for this purpose.

Sir Rolf Dudley Williams: Will the right hon. Gentleman draw the attention of the South-West office at Bristol to the necessity for improving the carriage of freight by air in the South-West? Will he see whether it can give assistance in that respect?

Mr. Brown: Certainly. I suggest that the hon. Gentleman might ask the Council to look at that.

Input-Output Analysis

Mr. Tinn: asked the First Secretary of State and Secretary of State for Economic Affairs what plans he has to use input-output analysis in his Department's planning techniques.

Mr. George Brown: We are already doing this, using the facilities of the Central Statistical Office and of the Department of Applied Economics at Cambridge.

Mr. Tinn: Is my right hon. Friend aware how welcome that reply is, for which I thank him? Will he undertake to keep a close watch on development along these lines in America and Russia and the research work being done at Cambridge?

Mr. Brown: Yes. I do not want to hide from the House the fact that there is room for enormous improvement on our past practice in the provision of statistics, and we are looking at that matter now.

Oral Answers to Questions — DEFENCE EXPENDITURE (COSTING)

Mr. Sheldon: asked the Prime Minister if he will set up a committee to inquire into the most appropriate methods of costing within Government Departments concerned with defence matters.

The Prime Minister (Mr. Harold Wilson): No, Sir. I am satisfied that the new functional costing system is on the right lines though my right hon. Friends and I are always willing to consider suggestions for improvement.

Mr. Sheldon: Is my right hon. Friend aware that the Ministry of Defence, for technical reasons, is unable to provide information on the total cost of our commitments east of Suez and that, without it, wrong decisions may well be taken? Would my right hon. Friend look into this again and see what might be done?

The Prime Minister: I do not think that my hon. Friend has it right. There has been over a year or two a great improvement in the cost-effective system. I have had the opportunity of seeing some of this work in the Ministry of Defence. It has greatly improved over the last year or two, and particularly over the last few months. It certainly is not the case that we are unable to get a costing of, not only individual weapons, but individual parts of military expenditure. I should like to consider whether, without any breach of security, it would be possible for one of my hon. Friends in the Department to indicate to my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) something of the work being done, which is quite impressive.

Sir C. Osborne: Would not the Prime Minister agree that what the nation requires most is not a better analysis of Government expenditure, whether it be in defence or anything else, but a reduction in Government expenditure? Will the right hon. Gentleman have a look at that?

The Prime Minister: I am most grateful to the hon. Gentleman for his promise of support. He did not show it in his votes on certain aircraft debates which we had very recently. In order to get the most effective defence system within a given level of cost, it is right to have the kind of analysis for which my hon. Friend asks. The position is, as the hon. Gentleman knows, that the defence programme, as we took it over, would inevitably escalate at 1964 prices to £2,400 million, arid more than that if no changes are made. We intend to get it very substantially below that figure and, therefore, we must have some method of cost-effective analysis to get it down to that figure. Therefore, the hon. Gentleman is wrong, but we look forward to his support when we get vie Opposition censure Motion about it.

Oral Answers to Questions — NUCLEAR WEAPONS

Mr. Marten: asked the Prime Minister if he will make a statement on Great Britain's nuclear strategy.

The Prime Minister: I would refer the hon. Member to the reply I gave on 1st June to a Question by my hon. Friend the Member for Woolwich, West (Mr. Hamling).

Mr. Marten: Is it the Government's intention that the Supreme Allied Commander, Europe, should be given greater control over the strategic nuclear weapons, including the Atlantic Nuclear Force? If so, is this not slightly edging towards a greater degree of proliferation, and does it have the consent of the West German Government?

The Prime Minister: On this question, we always recognised that it was a particularly difficult one in our formulation of the allied nuclear force and when we debated this last December there was some exchange across the Floor of the House. I think that on balance the Leader of the Opposition supported the

idea that SACEUR should have this responsibility. We gave our reasons against it. We have had consultations with our allies. We have thought again. There was a narrow margin. I think that on balance it is right that he should have this responsibility. This has nothing to do with poliferation because our A.N.F., unlike the M.L.F., has built-in safeguards against proliferation.

Mr, Mendelson: Has my right hon. Friend given approval for the policy proposed by the American Secretary of State for Defence that there should be a group of four Powers, including West Germany, particularly concerned with the strategic planning of the use of nuclear weapons in N.A.T.O., and will he bear in mind that there is strong opposition, at least on these benches and in parts of the country, against West Germany being associated with direct or indirect planning of the use of nuclear arms?

The Prime Minister: We have had a number of questions about how far our proposals for an allied Atlantic nuclear force are going. I think that the suggestion of Mr. McNamara is extremely helpful in carrying forward our discussions within N.A.T.O. of the examination of A.N.F. One thing which, I think, is now plain is that the M.L.F., which we opposed—all of us—is now not the front runner in these considerations but that the British proposal for an A.N.F. is the front runner in these proposals, and it is right that we should have discussions about it. Certainly, however, the way that we have formulated this means no German finger on the nuclear trigger. I hope that my hon. Friend will be glad of that fact.

Sir W. Bromley-Davenport: To preserve Cabinet unity, will the right hon. Gentleman give a firm undertaking that he will come to no final decision in this matter without prior consultation with, and the full approval of, his right hon. Friend the Minister of Technology?

The Prime Minister: I congratulate the hon. and gallant Member; he is coming on. The point which I should like him to realise is that our proposals for the Atlantic Nuclear Force, stemming as they do from our desire to stop the spread of nuclear weapons, have the support of a united Cabinet. The hon. and gallant


Member may recall that the proposal for the M.L.F. led to a complete split in the Conservative Cabinet between the present Leader of the Opposition, who supported it and still supports it, and the then Secretary of State for Defence, who opposed it and still opposes it and carries on his argument with the right hon. Gentleman, even in Opposition, in a defence debate.

Sir Alec Douglas-Home: I hope that when he studies the situation, the right hon. Gentleman will realise the inaccuracies in the statement which he has just made. First, there was no split in this matter—[Interruption.]—I am at least in a position to know—but, secondly, any proposal put forward by the Americans for the M.L.F. always was accompanied by the assurance that an agreement would be attached to it, which would mean that nuclear weapons would not be proliferated.

The Prime Minister: I find it difficult in those circumstances to explain why the Foreign Office, under the right hon. Gentleman, was briefing the whole of the Press for the M.L.F. and that the Ministry of Defence was briefing the whole of the Press against the M.L.F. I also find it difficult to understand why, even in Opposition, the right hon. Gentleman should carry on this shadow Departmental battle, because in the last defence debate he came out in favour of the M.L.F. and his right hon. Friend the Member for Monmouth (Mr. Thorneycroft) came out against the M.L.F. Our proposal was explained in great detail, as I have said—and it is a united Government policy—for the Atlantic Nuclear Force. But as far as the right hon. Gentleman is concerned, throughout this year—[HON. MEMBERS: "Get on with it."] I am answering the point. Hon. Members opposite will get it whether they like it or not. Throughout last year, the right hon. Gentleman dodged every Question on M.L.F. and on this and all other issues we did not have the straight talk from him that he promised.

Sir Alec Douglas-Home: Will the Prime Minister realise that when it comes to questions of dodging, I am prepared to be judged and to allow other people to judge that between us? Will he also recognise that I am trying to make what

is really a limited point? As I understand it, the right hon. Gentleman is claiming that the A.N.F. will not lead to a proliferation of nuclear weapons. I am asking him to recognise, which he has so far refused to do, that neither did the American proposal for an M.L.F. There was never any question of a German finger on the trigger in that.

The Prime Minister: First, as to the right hon. Gentleman's preamble, on this question he never gave a clear answer. On the A.N.F., we did give a clear answer in a very long speech by me. So let us have that straight. [Interruption.] I shall answer the question. I am answering the preamble first.
If the Leader of the Opposition really wants to put this to the test, I hope that he will now come clean with his right hon. Friend on a few issues on which he has entirely refused to give an answer—from incomes policy to Europe. [Interruption.] I know that hon. Members opposite do not like this.
As to the second point, all that the right hon. Gentleman has repeated twice—[Interruption.] If hon. Members opposite want an answer, perhaps they will listen. On the second point that the right hon. Gentleman has raised, all that he is still doing is tagging behind the American proposal on M.L.F. The right hon. Gentleman never put forward any proposal in the N.A.T.O. context to end proliferation of nuclear weapons. We have. That is the difference between us.

Oral Answers to Questions — EUROPEAN FREE TRADE ASSOCIATION AND IMPORT SURCHARGE

Sir F. Bennett: asked the Prime Minister if he will make a statement on the visit of Ministers to the European Free Trade Association and on the progress being made towards the removal of the import surcharge.

The Prime Minister: Since the hon. Member's Question has been on the Order Paper for three months I am not certain which particular Ministerial visit to the European Free Trade Association he has in mind. If he is concerned with the visit of my right hon. Friends the First Secretary of State, the President of the


Board of Trade and my noble Friend the Minister of State for Foreign Affairs to Geneva in February, I would refer him to the communiqué issued after the meeting, a copy of which is in the Library. If, on the other hand, he is concerned with my visit to Vienna last month, I would refer him to the Answers I gave to Questions by the hon. Members for South Angus (Mr. Bruce-Gardyne) and Blackpool, South (Mr. Blaker) on 1st June.

Sir F. Bennett: If I may be forgiven a short counter-preamble, may I say that the reason why—

Mr. William Hamilton: No.

Sir F. Bennett: May I ask whether the Prime Minister realises that the only reason why the Question remained upon the Order Paper that long is because he has always found a very good reason for making his supplementary answers so long that it has not been reached earlier?
As regards the Question, I should like to ask the Prime Minister today—as nothing at all has happened in any event in the last three months, nothing has been lost to it—whether he would agree that the surcharge was originally imposed, in the words of himself and of his co-Ministers, in terms of a few months only. Would he like to say what he regards as the maximum limit of "a few months", as I know that he would value—[HON. MEMBERS: "Speech."]—it is much better than the last one. As I know—[HON. MEMBERS: "Speech."]

Mr. Speaker: The House wants to make progress with Questions. That means that both the Questions and the Answers will have to be considered as to length. Will the hon. Member bring his supplementary question to an end?

Sir F. Bennett: Certainly, Mr. Speaker. I should love to do so. As I know that the Prime Minister would value a reputation for integrity, would he care to say whether he does or does not accept one year as being the limit of the duration of the surcharge?

The Prime Minister: If my answers are long, it is because the questions are long and because we have preambles to deal with. It might interest the hon. Member to know that in the period

during which I have answered Questions at this Box compared with the same period last year, I have answered more Questions than my predecessor. [Interruption.] This was an exchange of preambular courtesies. It is right that I should refer to it.
The question about the surcharge has been fully answered a number of times. We shall take it off at the moment when it is safe to take it off. I hope that the hon. Member would not want us to do it before it was safe to take it off. I am not at this moment forecasting when it will be safe. All I can say is that when we imposed it, it had the support of the right hon. Member for Barnet (Mr. Maudling), if not of the right hon. Member for Bexley (Mr. Heath).

Mr. Gresham Cooke: As the Government are so obviously optimistic about the balance of payments problem, as shown by the reduction in Bank Rate today, is not this the moment to take off the import surcharge altogether?

The Prime Minister: The two questions cannot be related in that way. My right hon. Friend the Chancellor of the Exchequer will be making a statement about Bank Rate and he will probably deal with that sort of question. We are, of course, determined this year to get a really substantial reduction in the balance of payments deficit which we inherited last year. This means not only conventional action in relation to exports, in which direction the action which we have taken has had a marked effect, but it also means some restraint of imports. It also means pretty tough action in regard to Government military expenditure abroad and to the action that had to be taken on the capital account, which was taken by my right hon. Friend in his Budget. All these must be allowed to add up to a really significant reduction in our balance of payments deficit before we can consider whether it is safe to deal with the surcharge question.

Mr. Heath: Will the Prime Minister agree that when he answered a supplementary question on this same conference last Tuesday, he said that during the negotiations in Brussels in which I was involved the trouble was—and I quote—that:
… at the time."—[OFFICIAL REPORT, 1st June, 1965; Vol. 713, c. 1514.]

Mr. Speaker: Order. Verbatim quotations are out of order in a question.

Mr. Heath: I was doing it only for the sake of greater accuracy, Mr. Speaker. To paraphrase, the Prime Minister said that during those negotiations I gave no assurance that the interest of the E.F.T.A. neutrals would be looked after. Is the Prime Minister aware that we know what he was saying in Vienna on this point? Is he also aware that this country signed what was known as the London Agreement in July, 1961, before we entered into negotiations which safeguarded all the E.F.T.A. countries, including the neutrals, that this was confirmed at every E.F.T.A. meeting and that it was stated in full at every stage in the European negotiations? [HON. MEMBERS: "Speech."] Will the Prime Minister therefore stop casting doubt—[Interruption.] This is an important matter—

Mr. Michael Foot: On a point of order. If a member of the Opposition Front Bench, however eminent, wishes to make a statement to the House on a general matter of his attitude to some past event, should he not ask your permission to do so, Mr. Speaker, instead of tacking it on to a Question?

Mr. Speaker: The matter can be assisted if the Prime Minister can now answer as to his awareness at present. That, I think, is the inquisitorial matter so far.

Mr. Fisher: Further to that point of order. Is it not fair to say, Mr. Speaker, that if criticisms are to come from the benches opposite to my right hon. Friend, we on his side are rather fed up that the Prime Minister's Questions are becoming Prime Minister's lectures?

Mr. Speaker: The state of fed-upness of the hon. Member does not raise any point of order. Let us get on.

The Prime Minister: The right hon. Gentleman was correct in referring to the London Agreement of June, 1961, which we supported and, indeed, pressed him to announce.

Mr. Heath: It was signed before the right hon. Gentleman knew about it.

The Prime Minister: The right hon. Gentleman is quite incorrect about that.

If he knows what went on in Vienna, I can tell him what went on in London and his right hon. Friend the Member for Barnet (Mr. Maudling) wanted to give that agreement and the right hon. Gentleman was resisting that agreement in London until the last possible moment. In order to answer his question; what we are concerned with—because June, 1961, was before the negotiations in Brussels—was that we would stick to that agreement. If the right hon. Gentleman will look up the text—I have not checked on this, because he gave me no notice that he had this prepared supplementary question, but my memory tends to be as good as his—he will find in successive debates on the Common Market, and I quote particularly the debates on 8th November, 1962, and 13th December, 1962, we were still demanding from him that he would honour that agreement and not go into the Common Market without satisfactory assurances for E.F.T.A. Week after week he refused to give that assurance, until the very end of the negotiations.

Sir F. Bennett: On a point of order. In view of the wholly unsatisfactory nature of that reply and the length of the Prime Minister's always interminable replies, I beg to give notice that I shall raise the matter on the Adjournment.

Mr. Speaker: It is out of order when giving notice to make a speech. The hon. Member should adopt the ordinary practice.

QUESTIONS TO MINISTERS

Mr. William Hamilton: On a point of order. The House will have noted that only three of the Questions to the Prime Minister have been answered. May I appeal to you, Mr. Speaker, to be much more ruthless in your calling of hon. Members for supplementary questions, as another 10 Questions to the Prime Minister today have no prospect of getting oral answers for at least another month?

Mr. Speaker: Before he makes his request on supplementary questions, I hope that the hon. Gentleman will look at HANSARD to see how the time was really occupied. [HON. MEMBERS: "Oh."] That is not directed at either


side of the House. [HON. MEMBERS: "Oh."] No, it is not. It is no good desiring the Chair to help the House to get on with Questions unless the House will help the Chair. I desire help with Question Time from both sides of the House.

Mr. Hamilton: Further to that point of order. May I draw your attention to the fact, Mr. Speaker, that it was four minutes past quarter past three before the Prime Minister got up to answer his first Question, directly because further supplementary questions were invited from the Opposition side of the House?

Mr. Speaker: If the hon. Member wishes to criticise the conduct of the Chair, he must take proper steps. On that matter he will have noted that more than one Question was answered together just at the point of 3.15, which affected the matter of which he has spoken.

Mr. Steele: Further to that point of order. Is not this a clear indication of the concern of the House about Questions, which previously led it to ask the Select Committee on Procedure urgently to consider the problem of Questions? Is it not unfair to the Committee, which did its job very quickly and which has reported, that its Report should not yet have been considered, because it not only cave advice to Members, but made suggestions which would be helpful to you, Mr. Speaker, in dealing with this matter? Ought not the House, through you, to indicate to the usual channels that this matter should be treated urgently?

Mr. Speaker: Lamentably, although I am grateful to the hon. Gentleman, I can only refer him to the answer which I gave to him on a point of order yesterday.

BUSINESS OF THE HOUSE

Sir Alec Douglas-Home: May I ask the Leader of the House whether he will state the business of the House for next week—I mean, the week after the Recess?

The Lord President of the Council (Mr. Herbert Bowden): I was about to say to the right hon. Gentleman, "None, Sir".
The business for the first week after the Whitsun Adjournment will be as follows:

MONDAY, 14TH JUNE—Supply [19th Allotted Day]: Committee.

Motion to move Mr. Speaker out of the Chair, when a debate will arise on an Amendment to take note of the Seventh Report from the Estimates Committee in Session 1963–64, on the Forestry Commission, and the Special Report relating thereto.

Lords Amendments to the Law Commissions Bill. Motions on the Silo Subsidies Schemes, and on the Calf Subsidies Scheme.

TUESDAY, 15TH JUNE, and WEDNESDAY, 16TH JUNE—We shall continue with the Committee stage of the Finance (No. 2) Bill.

THURSDAY, 17TH JUNE—Remaining stages of the Highlands and Islands Development (Scotland) Bill.

FRIDAY, 18TH JUNE—Private Members' Bills.

Sir Alec Douglas-Home: The Leader of the House will be aware of the strong feeling on both sides of the House that we should debate the position in South-East Asia, and I think that several hon. Members would also like to debate the affairs of Dominica. The right hon. Gentleman has not been able to fit in that debate for the week after the Recess. Can he say whether he will be able to do so in the week following that?

Mr. Bowden: I have given a promise to the House that we will have a debate on foreign affairs after the Whitsun Recess. I think that the actual time tabling should be left to the usual channels. As requested by the House, my right hon. Friend the Foreign Secretary is making a statement today.

Mr. Francis Noel-Baker: Can my right hon. Friend say when we shall have time for a debate on transport, and, in particular, on the Report of the British Railways Board? If it is difficult to give Government time, will he make representations through the usual channels for a Supply day, in view of the song and dance of the Opposition about certain aspects of transport policy, in extraordinary contrast to their attitude when the right hon. Member for Wallasey (Mr. Marples) was Minister of Transport?

Mr. Bowden: It would be rather quicker if the Opposition decided to use a Supply day, when I would agree, but, as far as I can remember, there is one nationalised industry day left.

Mr. Selwyn Lloyd: May I press the right hon. Gentleman on the question raised by his hon. Friends the Members for Dunbartonshire, West (Mr. Steele) and for Fife, West (Mr. William Hamilton)? There is a feeling in the House—and we do not want this to be a party matter at all—that there is something seriously wrong with the way in which we manage our business at Question Time. Could we not have an urgent debate on this matter? Will the right hon. Gentleman undertake that we will do so very soon after we come back after Whitsun?

Mr. Bowden: I have already promised that we shall have a debate on the Second Report of the Select Committee on Procedure on Questions, but we must get on with some legislation first. [Laughter.] I am sure that the House will agree with some of us, if not the majority, that we would like some Summer Recess. We have the Finance Bill to complete. If hon. Members want a Summer Recess, it will be necessary to get on with some legislation.
However, I appreciate the importance of Questions and the Government will be bringing proposals before the House on this subject. If I may be allowed a personal word, whatever the House does as a House, and whatever new Standing Orders we pass, there will be no effect whatever unless hon. Members themselves take some action.

Mr. Shinwell: Can my right hon. Friend tell the House whether he contemplates any measures to curtail discussion of the Finance Bill, particularly in view of the tirades to which we have to listen from the right hon. Member for Bexley (Mr. Heath)?

Mr. Bowden: There is already machinery in our Standing Orders for dealing with such a situation, of course, but I have no intention of using it at present.

Mr. Gardner: Is the Leader of the House aware of the dissatisfaction on both sides of the House with the way

in which the Government caused the curtailment of an important debate on Commonwealth affairs this week by at least an hour by allowing other lengthy business to precede that debate? Can he make amends by saying that he will allow time for a debate, before the Commonwealth Prime Ministers' conference, on the possibility of creating a supreme court of appeal for the Commonwealth, the subject of a Motion which has been signed by more than 100 Members?
[That this House would welcome the setting up of a Supreme Commonwealth Court of Appeal to deal as a final court of appeal with disputes between Commonwealth countries and appeals from Commonwealth courts and urges Her Majesty's Government at the forthcoming Commonwealth Prime Ministers' Conference to raise as a matter of urgency the creation of such a court.]

Mr. Bowden: It would have been quite in order to raise this subject in Tuesday's debate on the Commonwealth, a debate which was at the request of the Opposition and which took place before the Commonwealth Prime Ministers' conference, as requested. I cannot promise a further debate.

Mr. William Hamilton: May I press my right hon. Friend to give us a date to debate the problem of Question Time, preferably at a morning sitting? This would not conflict with the Government's legislative programme and would be convenient to hon. Members on this side of the House. Can he say whether he will appeal to the Opposition to settle their leadership question, because an element of neurosis keeps creeping into the attitude of the right hon. Member for Bexley (Mr. Heath)?

Mr. Speaker: We must confine business questions to business.

Sir K. Pickthorn: May I ask the right hon. Gentleman the Leader of the House whether he has seen a Motion, which, in view of the haste, I have had to hand in without showing it to people and which is now on the Table, and whether, in view of that Motion, he will now tell us on which day of the first week after Whitsun he will allow us to debate it?
May I ask you, Mr. Speaker, whether, in order that the House can understand


how urgent it is, I may read out the Motion?

Mr. Speaker: To make the right hon. Gentleman's question intelligible to those of us who do not have secret sight, I think that it would be helpful if he were to do so.

Sir K. Pickthorn: The Motion is as follows:
That this House, recognising the normal duty of the Chair to give a casting vote when the voices are equal, declares that proposals for taxation of the people cannot be initiated by this means without infringing the constitutional rights of the Commons and that the proceedings on postponed Clause 42 of the Finance Bill on 2nd June, 1965, are null and void.

Mr. Shinwell: On a point of order. Without expressing any view on the merits or otherwise of the right hon. Gentleman's submission, are we to understand that if he is permitted to read a Motion, as he has, any hon. Member may perform the same operation?

Mr. Speaker: No. I should not allow it in any normal circumstances. The abnormal circumstances were that, in view of the lateness of which the right hon. Gentleman spoke, I could not tell personally what it was all about and I wanted to know.

Mr. Bowden: May I ask your protection on this, Mr. Speaker? I already have to bear in mind 231 early day Motions. If, during the exchanges on business on Thursday, I am expected also to answer half-a-dozen questions on Motions which are read out, and of which I have had no previous notice, my position will become almost impossible. Part of the right hon. Gentleman's Motion seemed to be a reflection on the Chair and it is certainly not within the function of the Leader of the House to comment on the action of the Chair and as to whether its vote was correctly cast.

Mr. Speaker: The right hon. Gentleman shall have all my protection and respect. Everybody will appreciate his difficulties at this moment, in the same way as the right hon. Member for Carlton (Sir K. Pickthorn) did. No doubt we shall have leisure to look at this matter and consider it now that it is on the Order Paper.

Mr. Selwyn Lloyd: Would not the right hon. Gentleman agree that the number of Motions on the Order Paper is an indication of the highly inflationary situation in which we live? My right hon. Friend the Member for Carlton (Sir K. Pickthorn) was not asking for a comment; he was asking that the matter might be debated.

Mr. Speaker: Order. We must get on.

Mr. Orme: Noting the fact that two more days are to be spent on discussing the Finance Bill during the week that we come back, may I ask my right hon. Friend whether he is aware that many Members, particularly new Members, are tired of and fed up with the archaic system by which the House is run, and has been run for about 700 years, and that there is an urgent need for modernisation? Will he consider urgently the possibility of sending the next Finance Bill to a Committee upstairs?

Mr. Speaker: We cannot send the next Finance Bill upstairs in the business for the week after next.

Mr. Lubbock: May I ask the Leader of the House to deal with that part of the question asked by the right hon. Member for Fife, West (Mr. William Hamilton) which was in order? Does the right hon. Gentleman realise that the number of Motions on the Order Paper, and the number of questions addressed to him during the discussion on business every Thursday, are an indication of the strong feelings in the House that many matters which ought to be raised are not being debated? Will he therefore consider sittings of the House on Wednesday mornings, now that the Murder (Abolition of Death Penalty) Bill has been dealt with?

Mr. Bowden: On the question of morning sittings, I have said previously that I would not take any action unless it was the wish of the House that I should. If the House wished to continue to sit on Wednesday or Tuesday mornings, we would do so.

Mr. Hector Hughes: I notice that on Thursday of the week after next the proposed subject for debate is the Highland and Islands Development (Scotland) Bill. May I ask my right hon. Friend to substitute for that a more general


debate on trade, industry, and commerce, in north-east Scotland which has not been debated in this House for a considerable time but which needs urgent consideration?

Mr. Bowden: I have no doubt that my hon. and learned Friend would like to debate north-east Scotland, but at present we are concerned with getting the Highlands and Islands legislation through the House.

Commander Courtney: Can the Leader of the House say what are the Government's intentions with regard to the Anchors and Chain Cables Bill? I ask this because last Wednesday the Committee was unable to get a quorum due to the absence of three out of the five Socialist sponsors of the Bill.

Mr. Bowden: This is a small but important Bill. I will consider the matter.

Mr. Lipton: In connection with the further progress which most hon. Members want to make with the Finance Bill, may I ask my right hon. Friend whether it has come to his knowledge that a number of hon. Gentlemen opposite are seriously perturbed by the possibility that we shall still be discussing the Committee stage of the Finance Bill on the days of the Royal Ascot meeting? May we have an assurance that steps will be taken, through the usual channels, to ensure that the Committee stage of the Bill is disposed of before Royal Ascot for the benefit of a number of hon. Gentlemen opposite?

Mr. Bowden: Whatever the reason may be, I should like to see the Committee stage of the Bill disposed of quickly.

Sir K. Pickthorn: Mr. Speaker—

Hon. Members: Read it again.

Mr. Speaker: Order. We have a great deal of work to do, and I think that we had better keep quiet to allow progress to be made.

Sir K. Pickthorn: Mr. Speaker, as the Leader of the House has said that he heard only part of my Motion I think that I should tell the House that he has had a copy of it in his hand for an hour. [HON. MEMBERS: "0h."] As the Leader of the House has accused me of casting

reflections on the Chair, I think that I must be permitted to say—

Mr. Speaker: Order. The right hon. Gentleman can ask for time for a discussion of his Motion. I think that that might be said to have already been answered, in a negative sense. We cannot have a second reading of the matter now.

Mr. Bowden: I do not want to prolong the discussions on business, but I think that it should be made clear that, whatever the right hon. Gentleman may have done with a copy of his Motion, I certainly have not received it.

Sir K. Pickthorn: I apologise to the right hon. Gentleman.

Mr. Speaker: That shows how a breakdown in communications delays progress with business questions.

Mr. loan L. Evans: In view of the general demand for morning sittings, will the Leader of the House consider confining morning sittings to Tuesday, Wednesday, Thursday and Friday, as there are many hon. Members who have to travel long distances to get to the House on Monday?

Sir J. Langford-Holt: Has the attention of the Leader of the House been drawn to a Motion urging Her Majesty's Government to take immediate legislative action with regard to public service and Armed Forces pensions, in view of the fact that a Motion was signed in exactly the same terms in the last Parliament by 100 of his supporters, including four members of the Cabinet and 21 Members of the present Administration?

[That this House, recognising the hardship of public service pensioners and those retired from the armed forces, and especially of the older pensioners in these groups whose pensions bear no relation to similar pensions now obtaining in the public service and the armed forces, urges Her Majesty's Government to introduce special provisions to improve such pensions.]

Mr. Bowden: I seem to recall it, even during this week. My right hon. Friend has said that this matter is under review, which has been said before. I have promised that as soon as the review is complete a statement will be made, and probably a debate will take place on it.

Mr. Ridsdale: May I press the Leader of the House for an early debate on public service and Armed Forces pensions, particularly as the Prime Minister has refused to answer Questions addressed to him on this?

Several Hon. Members: rose—

Mr. Speaker: Order. We must get on with business.

CONGO (BRITISH SUBJECTS)

Mr. Anthony Fell: Mr. Anthony Fell (by Private Notice) asked the Secretary of State for Foreign Affairs whether, in view of the massacre near Buta in the Congo he will make a statement on the safety of Miss Margaret Hayes, a British subject, and other British subjects in the area.

The Secretary, of State for Foreign Affairs (Mr. Michael Stewart): Her Majesty's Embassy has reported that the Congolese Government forces, continuing their attempts to rescue those hostages still in rebel hands, have advanced in the area north of Stanleyville to Bondo and Buta. The rebels appear to have been massacring the remaining hostages.
The only United Kingdom citizen in the area is believed to be Miss Margaret Hayes. The confirmed figure for those rescued so far is 15, but details of their identity and nationality are not yet known. They are being evacuated by air to Leopoldville.
I shall keep the House informed of any news affecting British subjects.

Mr. Fell: I am sure that the House is grateful that the right hon. Gentleman himself has answered this Question. May I ask why no statement has been made by the Government for such a long time on the situation out there? May I further ask whether the right hon. Gentleman will show a bit more activity and robustness about the whole question of British lives and property all over the world? Will he now acknowledge the debt that we owe to the mercenaries who saved the lives of hundreds of hostages who were held in the hands of the rebels?

Mr. Stewart: It is true that the Congolese National Army and the forces with it have been successful in rescuing

many hostages, including some United Kingdom subjects—and everyone will be glad for that. It would not have served any useful purpose for me to have made a statement earlier, as at that time there would not have been any special news to report. But, as I have said, I shall keep the House informed.
The other comments of the right hon. Gentleman do not seem to me to be either accurate or helpful in this problem.

Mr. Fell: May I make a correction?

Mr. Speaker: Yes—a correction.

Mr. Fell: First, I am not right hon., and, secondly, the Foreign Secretary should not be so cowed by his Left wing that he has to attack other points of view—

Mr. Speaker: Order. The hon. Member was called to ask a supplementary question, not to make a statement.

CAMBODIA AND VIETNAM

The Secretary of State for Foreign Affairs (Mr. Michael Stewart): With your permission Mr. Speaker, and that of the House, I wish to make a statement on Cambodia and Vietnam.
On Cambodia, as I am stating today, in reply to a Question by my right hon. and learned Friend the Member for Rowley Regis and Tipton (Mr. A. Henderson), I have placed in the Vote Office a White Paper describing the course of events and stating our readiness to join with the Soviet Union in convening a conference in accordance with the wishes of the Royal Cambodian Government.
On Vietnam, the aim of Her Majesty's Government is to obtain a conference so that fighting could end and a lasting settlement be obtained. The continuance, and, indeed, the intensification, of the war makes this all the more necessary.
This could be done by reconvening the Geneva conference, of which Mr. Gromyko and I are co-chairmen. I have on several occasions proposed to Mr. Gromyko that we should re-convene this conference, but he has so far refused. I now say again that I am ready at any time to join with him for this purpose.
I have previously described to the House various other methods of promoting negotiations which we have proposed, all of which have been rejected. Despite these refusals we shall now examine other ways in which a conference could be secured. In particular, it may be possible to build on the declaration by the 17 non-aligned countries; since some of these are members of the Commonwealth, we shall consult them at the forthcoming Commonwealth conference.
There is no reason, in common sense or humanity, why the following sequence of events should not occur. First, a conference under whatever auspices can be agreed; a cease-fire could either precede such a conference or be achieved at the conference. Next, a settlement which would assure South Vietnam against any form of aggression. Once so assured, South Vietnam would be a country in which there were no foreign troops or bases, and which was tied to no military alliance. Her citizens would then have the opportunity to repair the ravages of war and to determine, freely and in peace, their form of government.
The future relationship between North and South Vietnam should be a matter for free decisions by the peoples of both countries. There would also be opportunity for a programme of economic reconstruction, under United Nations administration. The United States has promised a generous contribution to such a programme; Her Majesty's Government would contribute, and I trust many other countries would do likewise.
This, I believe, is the right road. But I must tell the House that at present a barrier is erected at the very beginning of the road. That barrier is the refusal of the Governments of North Vietnam, China and the Soviet Union to negotiate at all. I repeat that, despite this refusal, Her Majesty's Government will continue to work for a conference by any method which offers any chance of success.

Mr. Peter Thomas: Is the right hon. Gentleman aware that, despite the fact that he had nothing new to say, hon. Members on this side of the House are grateful to him for his statement, and certainly echo many of the hopes that he expressed?
As to Vietnam, does not he agree that President Johnson has already said that he would be willing to talk with anyone without imposing any conditions, and that the North Vietnam Government and the Chinese Government have shown no disposition whatsoever to have these talks, or even to negotiate? Will the right hon. Gentleman make it perfectly clear that while at all times we should strive to find opportunities for negotiation, Her Majesty's Government nevertheless fully support the United States in its objective to ensure the territorial integrity and national sovereignty of South Vietnam?

Mr. Stewart: The right hon. Gentleman says that there is nothing new in my statement. That is correct in the sense that there is no announcement of any change of policy, but I think that I have gone rather further in describing what we believe could be the events in the future in South Vietnam. I thought that it would be useful for the House to have a picture not only of what the government think it right to do now, but where we believe that events could move.
It is correct that President Johnson has said that he is ready to have a conference without pre-conditions.
On the last point made by the right hon. Gentleman, I believe—as I said before—that until we can get a conference and a cease-fire it must be expected that the United States will take such military measures as are fitting and measured to the attacks which are being made by North Vietnam.

Mr. Arthur Henderson: In view of the general agreement on the urgent need to end the conflict in Vietnam, and also of the fact that a solution will have to be found round the conference table eventually, and, also, since the Foreign Secretary has referred to the difficulties in convening a conference and the opposition of certain Powers, including the Soviet Union, would it not be possible to invite the Secretary-General of the United Nations to make a fresh start and to invite him to convene a conference of all the signatories to the 1954 Geneva Agreement?

Mr. Stewart: That is certainly a possible approach. The Secretary-General


has endeavoured to help in this matter before, but with no more success than the rest of us. In the present situation, however, I should be willing to consider whether my right hon. and learned Friend's suggestion might be useful.

Mr. Grimond: Can the Foreign Secretary say whether the United States has accepted the policy indicated by what he has described as the sequence of events which might follow a conference in this area? Am I right in thinking that the United States has offered a conference with no strings attached, either with or without a cease-fire, and with an open agenda? If so, can the right hon. Gentleman inform the House of the latest reasons given by North Vietnam, China and the Soviet Union for not joining such a conference?

Mr. Stewart: It is true that the United States has made clear its willingness to enter into a conference without preconditions, whether there was a cease-fire before or not. The rest of what I said seems to me to be in line with declared statements of American policy.

Mr. Grimond: Has the United States accepted the sequence of events described by the Foreign Secretary?

Mr. Stewart: I am not saying that I asked them to look at the statement before I made it to the House, but if the right hon. Gentleman will look at the statements made on a variety of occasions by the President of the United States and others speaking for the United States Government he will see that they are in full accord with the sequence of events that I have outlined here.
As to the reasons given by the other Powers concerned for not coming to a conference, their general line has been that it must be a pre-condition that all United States forces should be withdrawn from Vietnam.

Mr. Grimond: Is it an agreed policy?

Mr. Stewart: I want to get this clear. This is not an agreed statement, but every item in it is in accord with the statement already made on behalf of the United States Government.

Mr. Michael Foot: I express gratitude to the Foreign Secretary for responding to the invitation to give this statement

today. Does he not agree that if the United States were to cease bombing of North Vietnam it might contribute to getting the conference which he desires? Has he made representations to the United States to that effect? Has he made a comment to the United States on the proposals of the Canadian Prime Minister which were made a few weeks ago on lines not very different from the suggestion which I am making?

Mr. Stewart: We have made this and many suggestions to the United States. I think that my hon. Friend is overlooking the fact that the United States did halt the bombing, but, unfortunately, the reply from the other side was that this was a trick and a deceit.

Mr. Biggs-Davison: Can the Foreign Secretary say whether and to what extent North Vietnamese forces are operating in South Vietnam in support of the Vietcong?

Mr. Stewart: I do not think that one can say to what extent. That it is occurring on a considerable scale is quite clear. That has been made clear over a number of years. We know that, for example, from the report of the International Control Commission in 1962.

Mr. Paget: Does my right hon. Friend agree that the trouble here is that the North Vietnamese, who are suffering reprisals, are not in a position to stop this war, while the Chinese, who are in a position to stop it, are quite prepared to fight the Americans to the last North Vietnamese? How do we get out of that situation?

Mr. Stewart: I think that my hon. and learned Friend will understand if I do not attempt to reply to that question. I do not think that very much useful purpose is served by trying to speculate unduly on the motives guiding the policies of other Governments. We have to deal with the facts and attitudes taken up, whatever may be the motives for them.

Mr. Blaker: Is the right hon. Gentleman aware that his statement that North Vietnamese forces have been operating in South Vietnam for a number of years is absolutely true? Is he also aware that it pulled the rug out from under the Prime Minister, who, in repeated statements, has said that there has in recent months been a change in kind in connection with such


events, and has justified the change in the attitude of the party opposite on that basis?

Mr. Stewart: I was aware that what I was saying was true.
What the hon. Member is overlooking is the important change which came when the North Vietnamese Government themselves openly admitted that they were doing this. The phrase was used that they were "at war" in South Vietnam.

Mr. Warbey: Is my right hon. Friend aware, first, that the North Vietnam Government have never admitted that they are at war with South Vietnam, but only that they are helping South Vietnam to fight a war of liberation against the Americans? [Laughter.] I am merely stating what they have said. Secondly, why does my right hon. Friend persist in ignoring what U Thant himself described as one of the clues to peace in Vietnam, namely, the positive statement of the Prime Minister of North Vietnam, on 8th April, when he set forward the basis on which his Government would be prepared to enter into a conference, and, moreover, did not at that time state that they would not enter into a conference until every American soldier was out of Vietnam?

Mr. Stewart: On the first part of my hon. Friend's question, it is correct that this is how the North Vietnamese Government describe what they are doing. That means that, whatever descriptions one applies, they are participating and sending men and supplies and military direction into this conflict.
In reply to the second part, there has never been any indication from that side of willingness to negotiate except on the basis of the withdrawal of American troops and the determination of Vietnamese affairs in line with the principles of the two Communist organisations in North and South Vietnam. That is much too one-sided to be a basis for a conference.

Mr. Eldon Griffiths: Is the Foreign Secretary aware that, since he took office, he has been very highly regarded for his own firmness over the Vietnam matter in facing very great difficulties at home and abroad? I have two precise questions. Could he elaborate a little on the

overtures made by the British Consul General in Hanoi to the North Vietnamese authorities during the American bombing pause? Secondly, could he say something more about what terms of reference for the conference he envisages and what sort of membership he hopes to attract there?

Mr. Stewart: The hon. Member has a Question down for answer later on the first point which he raised. As I shall be able to answer more fully then, I should be obliged if he would not press me on that at this point.
I do not think that one can go into more details. I tried to phrase my statement in general terms—for example, the conference "under whatever auspices can be agreed, either before or after a ceasefire." Presumably, the general purpose of the conference is to get a situation in which the fighting stops and North and South Vietnam can live at peace. I know, of course, that the 1954 Agreement had in mind, ultimately, free elections in both parts of Vietnam and unification on that basis.
I should have thought that it would not be very realistic to expect that to be possible in the near future. What one would want to get first is a period of peace for both countries in which they could recuperate and then, as I said, the future relationship between them could be a matter, in time, for the free decision of the peoples of both countries.

Mr. Philip Noel-Baker: While thanking the Secretary of State for his new and constructive statement, may I urge on him that, in view of the very grave escalation of the war which has already happened and of the much graver escalation which now threatens in view of the recent statement from Peking and elsewhere, he should take up the suggestion of my right hon. Friend the Member for Rowley Regis and Tipton (Mr. A. Henderson) and have consultations with the Secretary-General of the United Nations with a view to seeing whether they could find a method for the 17 nations which signed the statement to which he referred to get a conference at a very early date?

Mr. Stewart: I shall most certainly examine that suggestion and any suggestion which seems likely to bring about


the first step, which we all want, of a conference of some kind with the general willingness to reach a settlement.

HIRE PURCHASE AND BANK RATE

The Chancellor of the Exchequer (Mr. James Callaghan): As the House knows, the Governor of the Bank of England wrote to the banks and other financial institutions last month, requesting them to limit the increase in credit granted by them during the 12 months ending in March, 1966, to an annual rate of 5 per cent. I have been assured that this request will be observed by those to whom it was addressed, but in order to ensure that the control is generally effective the Government have decided on some tightening of the statutory controls over the field of hire purchase and rental arrangements.
My right hon. Friend the President of the Board of Trade has, therefore, today made two Orders. In the case of hire-purchase and credit sale, where the minimum deposit has been 20 per cent., this is increased to 25 per cent., and where it has been 10 per cent. it is increased to 15 per cent., with certain exceptions. Similar provisions have been made for hiring agreements.
This will close a gap in the credit structure and so help to prevent consumption eating into the resources that are needed for exports and investment. The continuing control of the credit situation, and the recent substantial strengthening of our gold and dollar reserves, enable the nation to secure the advantages that accrue from a reduction in short-term interest rates.
The 7 per cent. Bank Rate involved a considerable cost to the balance of payments and to the Budget, and weighed heavily on industry as well as the individual citizen. Therefore, I have agreed with the Bank of England that Bank Rate should be reduced from 7 per cent. to 6 per cent.

Mr. Heath: Will the Chancellor accept that the House is grateful to him for coming here and making this statement this afternoon and appreciates the heavy responsibility which he bears when adjusting or agreeing to a change in Bank Rate,

in weighing up the advantages to the balance of payments, to the Treasury and to industry in a reduction, compared with the necessary degree of support for sterling and attracting deposits to this country? Will the Chancellor accept that the whole House would want it to go out that any change in the Bank Rate here in no way diminishes its determination to do everything possible to support sterling?
So far as hire-purchase agreements are concerned, will he agree that this is the last, or the latest, of the further burdens on the people and that it is the latest of a series of measures of this kind, some of which might have been more effective if taken together rather than in a string? It is also the form of influence on the economy which is most distasteful to industry, which feels it distorts the pattern of demand. Will he agree that he is now pursuing a policy of tightening credit and, at the same time, cheapening it and that this involves particular complications for him to which he will no doubt require to give his utmost attention during the coming months?

Mr. Callaghan: I think that it is well that everyone in the world should know that the country is united to defend the position of sterling. I may add that we have the resources to do it. With the recent strengthening in the reserves there is no doubt that we can finance our deficit, which is being rapidly reduced during the course of the current year.
I am much obliged to the right hon. Gentleman for what he said about hire-purchase restrictions. It is true that this will mean that the minimum deposit that has to he put down will be rather more than it has been. There are offsetting factors in the sense that in the case of the motor car trade, where, I think, exports are particularly important, two-thirds of the old cars are traded in and, therefore, the minimum value is likely to be greater than that of the 25 per cent. required.
What I am doing here is not to ease credit. This is really closing a gap, which I will not go into now so far as the technical details are concerned, and which results from the position of some of the institutions. I think that they readily accept it on that basis.
I think the fact that we are trying this system of inviting the institutions to regulate the increase in their credit facilities


to 5 per cent. means that we can plan to cheapen it. In other words, if the supply is restricted one does not have to depend so much on the price. That is the reason, including the strengthening of the reserves, why I felt able to agree to a reduction in Bank Rate.

Mr. Frank Allaun: Is the Chancellor aware that this 1 per cent. reduction will bring great relief, particularly to councils anxious to increase their housing programmes and will mean about a 10s. a week saving on the average rent? Whilst short-term interest rates will follow this reduction immediately, will the Chancellor now ask the P.W.L.B. to reduce its long-term interest rate, because it now stands at 7 per cent.?

Mr. Callaghan: While thanking my hon. Friend for what he has said, I must point out that the Public Works Loan Board's long-term rates did not rise with the 7 per cent. Bank Rate. They were pegged by me on 19th January last and, therefore, in so far as they did not rise, it will not be easy for me to ask that they should fall even further.

Mr. Grimond: Can the Chancellor say whether the exceptions to these increases which he has menioned cover such things as machine tools and other capital goods, as there would seem to be some case for distinguishing between hire-purchase and rental agreements in respect of these goods for essential equipment and consumer goods?

Mr. Callaghan: These restrictions concern consumer goods. They exclude machine tools. Obviously, they would exclude commercial vehicles. They would exclude small 30-cwt. vans, provided

that they have a carrier's licence. We have also taken a further power, for a particular reason. I think that the House would agree that it is a comparatively small matter in some ways, but important to some people, especially newly weds, to exclude furniture and that kind of what is called "add to" arrangements. I think that this is a small concession that can be given without danger to the general credit restrictions.

Mr. Monslow: May I ask the Chancellor whether, in the light of the persistent rumours in the Press this week that building societies were to increase their rates to 7¼ per cent., there is any action which he can take now to effect a reduction from this suggested increase?

Mr. Callaghan: There is no doubt that this reduction in the Bank Rate should help the flow of funds to the building societies. That will stop any further increase that might be found to be necessary. In the long run, I trust that it will seep through—it may take some time—into the form of an even lower rate. But I think that we must wait for the natural flow of money to seep through into these institutions.

Several Hon. Members: rose—

Mr. Speaker: Order. The House will have an opportunity of discussing economic matters during the course of the next few weeks.

MAGNA CARTA CELEBRATION

Resolved,
That this House authorises Mr. Speaker, as representing this House, to attend a service in the Cathedral Church of Saint Paul on Thursday 10th June in celebration of the Seven Hundred and Fiftieth anniversary of the sealing of Magna Carta.—[Mr. Bowden.]

Orders of the Day — FINANCE (No. 2) BILL

Considered in Committee [Progress 2nd June].

[Dr. HORACE KING in the Chair]

Clause 42.—(INTRODUCTION FOR COM PANIES ETC. OF CORPORATION TAX, IN PLACE OF INCOME TAX AND PROFITS TAX.)

4.28 p.m.

Sir Cyril Black: I beg to move Amendment No. 58, in page 50, line 6, after "rate", to insert:
(hereinafter referred to as 'the standard rate of corporation tax')".

The Chairman: With the Amendment we will be taking Amendment No. 59, in page 50, line 6, after "determine", insert:
but any such rate shall be reduced on small profits in accordance with the provisions of the following three subsections";

Amendment No. 60, in line 9, at end insert:
Provided that the rate at which corporation tax may be charged in respect of any company shall not exceed such percentage of the standard rate of corporation tax as is specified in relation to the profits of such company in column 2 of Schedule (Rates at which corporation tax may be charged) to this Act;

Amendment No. 61, in page 50, line 9, at end insert:
(2) Where the profits arising in any chargeable accounting period from a trade or business, computed apart from the provisions of this and the two next succeeding subsections and including franked investment income, do not exceed two thousand pounds, the profit arising from the trade or business for that period shall be deemed for all the purposes of the enactments relating to the profits tax to be nil.
(3) Where the profits arising in any chargeable accounting period from a trade or business computed apart from the provisions of the preceding subsection, this subsection and the next succeeding subsection, and including franked investment income, exceed two thousand pounds but are less than twelve thousand pounds, the profits arising from the trade or business in that period shall, subject to the provisions of this section, be deemed for all the purposes of the enactments relating to the corporation tax, to be reduced—

(a) where there is no franked investment income, by a sum equal to one-fifth of the difference between the amount of the profits computed as aforesaid and twelve thousand pounds;

(b) where there is franked investment income, by a sum which bears to one-fifth of the difference between the profits, computed as aforesaid and including franked investment income, and twelve thousand pounds the same proportion that the profits arising in that period from the trade or business, computed as aforesaid but not including franked investment income, bear to the profits arising in that period from the trade or business, computed as aforesaid but including franked investment income.

(4) In relation to a chargeable accounting period of less than twelve months, references in this section to two thousand pounds and twelve thousands pounds shall be construed as references to a sum which bears the same proportion to two thousand pounds or twelve thousand pounds, as the case may be, as the length of the period bears to twelve months.

Amendment No. 68, in Clause 45, page 55, line 3, after first "the", insert "standard", and Amendment No. 85, the proposed new Schedule.

SCHEDULE

RATES AT WHICH CORPORATION TAX MAY BE CHARGED

Corporation tax shall be charged, in respect of those portions of the profits of a company shown in Column 1 of the undermentioned table, at rates not exceeding such percentages of the standard rate of corporation tax as are respectively shown in column 2 of the said table.

1
2


Portion of profits
Maximum rate of corporation tax


The first £2,000
Nil.


The second £2,000 or part thereof.
15 per cent, of standard rate of corporation tax.


The third £2,000 or part thereof.
30 per cent, of standard rate of corporation tax.


The fourth £2,000 or part thereof.
45 per cent, of standard rate of corporation tax.


The fifth £2,000 or part thereof.
60 per cent, of standard rate of corporation tax.


The first £5,000 or part thereof above £10,000.
80 per cent, of standard rate of corporation tax.


Every further £5,000 or part thereof.
100 per cent, of standard rate of corporation tax.

Sir C. Black: I think that it would be in accordance with what you have indicated to the Committee, Dr. King, if, at the same time, I moved Amendments Nos. 60 and 85.

The Chairman: It is not in order to move more than one Amendment.

4.30 p.m.

Sir C. Black: That being the case, I will refrain from so doing.
I hope that Amendments Nos. 58, 60 and 85 may be regarded as both moderate


and reasonable. Certainly, it is my intention to commend them to the Committee in a speech that I hope will be moderate and reasonable. I would like, as far as I am able, to discharge this task with a maximum of light and a minimum of heat. I believe that they are so necessary and so reasonable that the Government must be willing to accept them.
What we are debating may appear to be a somewhat prosaic and technical matter of taxation, but it is of vital importance. Indeed, I am not overstating the case in saying that it is of such importance as to be literally a matter of life and death for thousands of small businesses and companies throughout the country.
I need not remind the Committee that the Corporation Tax is the successor to, and takes the place of, the Profits Tax. It will also be within the recollection of the Committee that the Profits Tax of 15 per cent. contained an exemption for the first £2,000, that there was then a graduated scale, from £2,000 to £12,000, and that the full rate of tax became payable only in the case of a company with a profit of £12,000 or more a year.
Not only the Profits Tax, but most taxes on both income and capital follow the principle of exemption and lower rates on small incomes and small capital sums. For example, this principle applies to Income Tax, Surtax and Estate Duty and it is general over practically the whole field of taxation.
The purpose of my Amendment, stated in its simplest terms, is to apply this principle to the Corporation Tax. The schedule which I give of the proposed rates would exempt the first £2,000 of profits from the Corporation Tax, and then there would be a graduated scale in respect of profits from £2,000 to £15,000, the rate of tax payable increasing as one goes up the scale. I have deliberately adopted £15,000 as the figure at which the full rate of tax would become payable, instead of £12,000 as under the existing Profits Tax, because allowing for the depreciation of the value of money in real terms, £15,000 today is probably approximately equivalent to £12,000 when the exemption was fixed in respect of Profits Tax.
I suggest that it is quite impossible to leave things as they are under the Bill as drafted. To do so would lead to a

really farcical result. The result would be that the smaller the company and the smaller the profit, the larger would be the percentage increase in the tax burden to be borne. And, conversely, the larger the company and the larger the profit, the smaller the percentage increase in the burden of taxation. I am sure that hon. Gentlemen opposite must agree, at any rate on this, that this would be a strange application of Socialist doctrine.
Without wishing to detain the Committee, I will briefly give a few examples, at various profit figures, comparing the tax liability prior to the advent of the present Government, and the tax liability under the proposals of the Finance Bill. I am assuming in this that we are looking at the burden of tax on the basis of a 15 per cent. Profits Tax, with its exemptions, and a 7s. 9d. rate of Income Tax. I will compare the position now, as it will be if the provisions we are discussing become law, with a 40 per cent. Corporation Tax and an 8s. 3d. rate of Income Tax.
I am assuming for the purpose of these figures a distribution of all the profits by way of dividend. If we assume that, we get these results. At a company profit of £2,000 the pre-Budget liability for tax would be £775 and the post-Budget liability £1,295, an increase of 67 per cent. At £5,000 the figures are £2,477 and £3,237, a 31 per cent. increase. At £10,000 the figures are £5,315 and £6,475, a 22 per cent. increase. At £50,000 the figures are £26,875 and £32,375, an increase of 20 per cent. So at the lowest profit figures one begins with an increased tax burden of 67 per cent., diminishing as one goes up the scale so that at a profit figure of £50,000 one gets an increase of 20 per cent.
It would be unusual for a company to distribute by way of dividend all its profit. I have, therefore, made an estimate of what the position would be assuming a normal case of distribution of 60 per cent. After all, for close companies—and most of the companies with which the Amendment would deal would be close ones, except in special circumstances—the distribution must be not less than 60 per cent. In this case, with a £2,000 profit figure, the increase in the tax burden is 41 per cent.; at £5,000 profit it is 10 per cent.; at £10,000 profit it is 3 per cent.; and at £50,000 profit it is 2


per cent. Again, the same pattern of a 41 per cent. increase in the tax burden at a profit of £2,000 and an increase of only 2 per cent. in the burden at a profit of £50,000.

Mr. Harold Lever: The hon. Gentleman has given the figures for the consequences of the change, assuming full distribution. Would he say what the advantage would be to a company earning £2,000 a year, compared with the previous situation, if we adopted his Amendment? In other words, how much would the Revenue lose in respect of such a company? Would he, further, give the effect of what he is proposing on the small company which does not make a distribution?

Sir C. Black: I do not have those figures worked out. As I understand the hon. Gentleman's question, taking the case of full distribution of profits by way of dividend, he is asking what the difference would be between the tax figures in the case of a £2,000 profit. The difference between a post-Budget tax bill of £1,295 and a pre-Budget figure of £775 is £520.

Mr. Harold Lever: The hon. Gentleman has given the effect of his Amendment on a company's taxation liability at £2,000 if the Budget proposals are carried. Will he now give the effect on a company's taxpaying obligation if his proposals were carried? I am asking him to give the figures based on a company's profit of £2,000 a year and no dividend—such a company's tax obligation if the Committee accepts his proposals, and how much reduction there would be from the Treasury point of view?

Mr. Eric Lubbock: Before the hon. Gentleman replies to that question, would he inform the hon. Member for Manchester, Cheetham (Mr. Harold Lever) that most of these companies are close companies and that, therefore, if they do not distribute anything at all the directors and shareholders are assessed at Surtax rates on the 60 per cent. shortfall?

Sir C. Black: I am grateful to the hon. Member for Orpington (Mr. Lubbock) for making that point. The answer to the hon. Member for Manchester,

Cheetham (Mr. Harold Lever) is that, taking the £2,000 company and assuming that no Corporation Tax is payable but that there is full distribution of dividend, the tax will be 8s. 3d. in the £ on £2,000—£825—against a pre-Budget liability of £775—

Mr. Harold Lever: If there is no dividend, how much tax will be paid?

Sir C. Black: I shall not assume something which, in the nature of the case, seems to be impossible. If I can be allowed to develop my argument a little further, I may be able to get at what the hon. Gentleman is interested in.
I want to anticipate two arguments that may be advanced to try to justify what I consider to be the essentially iniquitous proposal which is embodied here, and to which I object. It may be said, first, that the small company—and it is small companies with which we are dealing—can get over the difficulty by all the profit being taken out in director's fees. That point has been made to me, to some extent it is valid, and it should be dealt with.
That method might, to some extent, be a solution of the difficulty in cases where the directors and the shareholders are the same people, but in the very many cases where the directors and the shareholders are different people, the directors are entitled to be properly remunerated for their services as such, and the investors are equally entitled to be properly remunerated for the use of their capital as such. Therefore, this device—which, in any case, I suggest is bad in principle—of paying out all the profits in directors' fees, can have relevance only where the directors and the shareholders are the same individuals. That must be clear.
It is common knowledge that many young enterprising men who have the "know-how" to start and to run businesses, but have no capital, ask relatives and friends to provide them with the capital with which to start a small company. It would be fatal to the economy of the country for a situation to result—as it will, if my Amendment is not accepted—in which such shareholders were precluded from getting any adequate return on their money. Obviously, if there


is no prospect of an adequate return, no one will invest. There must be a reasonable return in the case of small companies with unquoted shares, because the risks of loss of marketability are very serious factors and there must, therefore, be an attractive prospect of a good dividend.
It may be urged against my Amendment that if dividends are not paid—and this is the point that the hon. Member for Cheetham was making just now—the consequences that I have mentioned in regard to the heavy tax burden will not occur. That is correct. It is a valid point, up to a point, but one has to recognise that if no dividends are to be paid it is unlikely that the capital can be raised, and a large number of enterprising young men who, under the present system of taxation, can get people to put up capital and start them in business in small companies, will not in future be able to do so, because the attraction of the dividend will not be there. So that is not a sufficient answer to what I seek to do.
The only way to deal with the matter is to accept the general principle of exemption and graduated scale in the case of small profits—a principle that operates generally over the whole field of taxation.

4.45 p.m.

Mr. Lubbock: I join the hon. Member for Wimbledon (Sir C. Black) in wishing to see some relief given to companies that have profits of less than £12,000 per annum, but I would not go quite so far as he has, as I shall explain. The hon. Gentleman has chosen a different figure from that which obtained in relation to the old Profits Tax, and has given substantially greater relief at the lower end of the profits figures.
I should like to compare his proposals with mine for companies earning profits up to £12,000 per annum. We agree in wanting to give complete relief on profits up to £2,000. For a company earning £4,000, his proposal would produce a tax of £120, and ours, one of £960; on profits of £6,000, his proposal would mean a tax of £360, ours, a tax of £1,920; on £8,000—his, £720, ours, £2,880; on £12,000—his, £1,680, ours, £4,800. As so many companies are in this profits range, the Revenue would

lose a substantial sum if the hon. Gentleman's proposals were accepted. In any case, the Minister without Portfolio may be able to indicate the relative costs of the two proposals.
The Minister will realise that the rules we have put into our Amendment are exactly the same as those used in the old Profits Tax case. As far as I can see, there is only one argument against that and it was touched on in his intervention by the hon. Member for Manchester, Cheetham (Mr. Harold Lever). He says that if companies at the lower end of the scale do not distribute at all, they will be very much better off. A company earning £2,000 per annum before, had to pay Income Tax of £825—at 8s. 3d. in the £—and Profits Tax of £300. That is a total of £1,125, which leaves the company after tax with a net figure of £875 available for retention or distribution—

Sir C. Black: With respect, I think that the figure of £300 must be wrong, because under Profits Tax there is exemption—

Mr. Lubbock: The hon. Gentleman is quite right, and I am grateful to him for his correction. This company would, in fact, pay only £825. That, however, does not alter the point made by the hon. Member for Cheetham that if the entire profits were retained, then, under either of our schemes, the company would not pay any tax at all. But, as I pointed out, one has to bear in mind that nearly every company in this profits range will be covered by the close company provisions and be compelled to distribute 60 per cent. of earnings—

Mr. Harold Lever: Mr. Harold Lever indicated dissent.

Mr. Lubbock: Perhaps the hon. Gentle.; men will give figures when he addresses the Committee, as I am sure he will, but that is my impression and, I think, that of most members of the Committee. We therefore get a very different situation.
I should like hon. Members to bear in mind a second point in relation to close companies. They cannot deduct interest on loans from their profits for the purposes of tax calculation. There is no means of knowing what difference this will make to the smaller company, but I have been sent figures from a number of companies which show that it will absolutely cripple them. In many cases,


where they have been making reasonable profits hitherto, the fact that they are not able to deduct interest on loans will put them well into the "red". Unless some of the Chancellor's promised Amendments deal with this point, there is no means whatsoever of them escaping the consequences of those provisions.
In most of these companies the shareholders are not rich men. They cannot suddenly replace the loan money with equity capital provided out of their own pockets. I doubt whether in the present credit squeeze situation a bank would look kindly on a director or a shareholder who said, "This will be very expensive for me if I have to pay interest on loan money. I should like to redeem the loan and replace it with equity capital out of my own pocket". I do not think that the Chancellor would encourage the banks to lend money for that purpose, not only because he wishes to keep total borrowings down, but also because this would make a substantial hole in the amount of revenue received from the new tax on close companies.
The Chancellor should do something for these smaller companies. After all, if he is prepared to do it in the Profits Tax case, where the level of taxation is only 15 per cent., how much more should it be done in the case of the new Corporation Tax at 35 per cent. or 40 per cent.? I shall not be dogmatic about it. My scheme, or the scheme of the hon. Member for Wimbledon, may not be the ideal way of doing it, but I should like the Minister without Portfolio to give us some crumb of comfort and say that he will recognise the position of the smaller companies and that, if he is not prepared to accept either of these schemes, he will come forward with one of his own to give them some help.

Mr. Harold Lever: There can be few ears in the House of Commons more receptive by reflex action to pleas for a reduction in tax than my own. Although I welcome the spirit with which the Amendment was moved and supported, I cannot agree that either the drafting or the strict purpose can be acceptable to the Chancellor of the Exchequer. It is asked that small companies shall, if they can justify no dividend payment, be totally exempted from tax. As I understand it, that is the purport of the Amendment.
It is all right saying that there are many cases where small companies would feel obliged to pay a dividend or would be compelled to pay a dividend by reason of the Clause 72 machinery. However, there are other cases where, for one reason or another, companies could not be compelled and would not feel inclined to pay a dividend and would hence earn their profits free of tax as to the first £2,000 and with little or no tax to pay on the higher areas of earnings that are dealt with in the Schedules, which, I regret to say, I have not studied with the detail which I perhaps should have devoted to them.
I think that I have the general tenor of it. We would be creating a little Jersey in our midst, where people in small companies would be paying no tax at all on the first £2,000, in many cases, and in other cases would be paying far less than normal. In these circumstances, we cannot possibly risk such a consequence occurring. I do not think that the hon. Member for Wimbledon (Sir C. Black) or his supporter intended any such consequence. [Interruption.] I gather that the hon. Member for Orpington (Mr. Lubbock) was not supporting the Amendment, except in principle. He was supporting his own Amendment. However, I do not think that either hon. Gentleman is in favour of the strict words of his own intentions as evidenced on the Notice Paper.
There is another objection. I want to get it in before the Treasury get it in, because the Treasury is very obsessed with this question. There is a real danger of tax avoidance arising if great care is not taken. The concession made under the old Profits Tax provisions was not used in the spirit in which it was granted by Parliament. What happened was that profits up to £2,000 in a company were exempted from Profits Tax and a number of people had a great number of little companies, where that was feasible, which traded without paying Profits Tax at all. This is not the intention of either the hon. Member for Wimbledon or the hon. Member for Orpington. I hope that the Chancellor will not use this as an objection to doing something for small companies, because it only needs a little drafting skill to ensure that the benefit of this provision is obtained only once.

The Minister without Portfolio: The Minister without Portfolio (Sir Eric Fletcher) indicated dissent.

Mr. Harold Lever: I see that my hon. Friend shakes his head. I do not like dusty answers on the basis of technical objections. If my hon. Friend says to the Committee, "There is a technical objection, but my heart is with you and, if we can overcome the technical objection, we will", that is one thing. However, my hon. Friend must not say that, because there is a technical objection he will not consider the matter further. I am sure that it is not a light task to overcome the technical difficulty, but I should like to hear my hon. Friend say that in spirit he would like to do something for the little man who has his small company and who has always had a concession.
It is not valid for hon. Members to argue about the deduction of interest, because the right place to complain about hardship resulting from that is when we discuss whether those Clauses shall stand as they now are. It may well be that the Chancellor will invite us and lead us by the hand into abandoning those Clauses or modifying them in a manner which may meet with warm response from both sides of the Committee. I live in expectations of such a happy eventuality. At all events, now is not the time to seek to remedy that difficulty.
The point which should be considered by the Government is this. Small people often trade as companies as an alternative to trading in their own names. It is widely recognised that corporate status for some of the smaller companies is socially desirable because, if they get into financial difficulties, it is not in the social interest that they should be personally made bankrupt and their personal possessions and homes be subject to the misfortune of their little business. On balance, it has been recognised in modern times that it is desirable to have corporate status for small traders. After all, nobody is obliged to give them credit if they do not want to. They know that they are trading with a company. We should not be too ready to discourage the use of corporate status by small companies.
The suggestion and the plea is that the spirit of the Amendment should be

accepted, not the word or anything like the cost to the Revenue which is envisaged. If the spirit is not accepted, namely, that a man trading in a small way in a small company shall get some of the tax reliefs which would accrue if he traded personally, it will be impossible for many small people to trade with corporate status and the social result will be disadvantageous and retrograde. I ask my hon. Friend the Minister without Portfolio to come with us in spirit first. Let us deal, first, with the spirit. Then, if he tells us that there are difficulties, we will all put our heads together and see if we cannot solve them.

Mr. Frederic Harris: As I understood what the hon. Member for Manchester, Cheetham (Mr. Harold Lever) said, he is obviously with us in spirit in the Amendment which has been so ably moved by my hon. Friend the Member for Wimbledon (Sir C. Black). It seems to be a great loss to the Government and to the Committee that we do not get the direct benefit of the real all-out experience of the hon. Member for Cheetham. Is not this a first class opportunity for the Minister without Portfolio, if he finds any difficulty, to suggest to the hon. Member for Cheetham that he might put forward a proposition himself to meet the difficulty? If such a proposition were taken up, it would surely have the full support of the hon. Member for Cheetham himself and all of us would be delighted to go into the Lobby in support of it.
I am very pleased to be directly associated with what I believe many hon. Members will think is a very reasonable and moderate Amendment. I am the first to recognise the difficulty to which the hon. Member for Cheetham referred, of the possibility of tax avoidance, because we all appreciate that this has occurred in the past, although it was not intended to be so. But, as he himself says, if it were done on the basis of a once-for-all company, one could with careful drafting find an answer to protect something which none of us would like to see abused.
5.0 p.m.
Like most hon. Members, I am very pro the small businessman. We all appreciate that small businessmen are vital to our country's economic life. Like many hon. Members, I have been appealed to


in my own constituency, and in Croydon generally, by small businessmen who feel great concern about their tax burdens as they appear to arise from the Bill generally and the Corporation Tax in particular.
My hon. Friend the Member for Wimbledon presented the Amendments with such excellent detail that I trust we shall have a clear answer from the Minister. Either my hon. Friend is right or he is wrong. If the Minister says that he is wrong, will he please tell us in what way? My impression, and the impression of most people, is that the small businessman will, unless the Government's proposals are amended, definitely pay relatively—I stress the word "relatively"—a higher percentage of tax than the larger business. Obviously, it is not right, and it must, be put right.
It is the duty of the Committee to do its utmost to protect small businessmen. They cannot easily protect themselves, and they are not in the same favourable position as large business houses which can take steps to ensure that they are not put in difficulties. But the small businessman turns to Members of Parliament to help him in these matters, and this is art ideal occasion for the Committee to respond and persuade the Government that there is something here to be put right.
I trust that the Minister will accept what we propose. If our Amendments are not drafted as he wishes, or if there is something technically wrong with them, as the hon. Member for Cheetham has pointed out, we ought, nevertheless, to have an assurance that the purpose behind them will be met by the Government. If the principle we are trying to establish is accepted, that there should be a certain amount of exemption or relief, or even a variation in the scales proposed, as the hon. Member for Orpington (Mr. Lubbock) has suggested, it becomes a question of degree and a matter which could be readily dealt with, the Government bringing forward their own proposals to meet it. We want to ensure that the small businessman has a chance to get on with the excellent job which he does today. Here is an opportunity for the Committee to respond and say quite clearly that it is not the intention to make things impossible for him.

Mr. Geoffrey Hirst: I support the Amendments which we are discussing. The meat is really in Amendment No. 85, the new Schedule, which proposes relief under £2,000 and a tapering off. The principle which has emerged in our discussions is vital. The smaller the company the greater is the weight of taxation under the Chancellor's new proposals, and this is quite insufferable. As we all must have done, I have received representations in my own constituency and from a much wider source, and it is plain that there is strong feeling of injustice here, which is recognised on both sides of the Committee. It is not just a feeling of injustice; clearly, injustice is done by the Bill and it must be put right.
As has been said, we do not expect to tie the Government to any specific Amendment on this matter, but the Minister will get into considerable trouble unless at this time, after the considerable notice he has been given my hon. Friend the Member for Wimbledon (Sir C. Black) has been particularly good in putting his Amendments down a long time beforehand—he has an answer to satisfy us that the Government really understand that there is injustice to smaller business people and that they intend to give a satisfactory reply. There must be a satisfactory reply. The position is intolerable.
Although the Government are not very friendly to free enterprise, I cannot believe that they gratuitously sat down to try to see how they could smack smaller businesses with the biggest bump of all. This must be something which arises out of the obviously extremely hasty, inexpert and most inaccurate Finance Bill that we have ever had. Here is a chance for the Government to "come clean" and show that they are not out to work a grave injustice on a large number of small business people.

Mr. Emlyn Hooson: There is considerable point in the observations of the hon. Member for Manchester, Cheetham (Mr. Harold Lever) that there are certain technical and drafting difficulties in meeting the case which has been made for relief, although such relief is widely desired. Nevertheless, those difficulties should not blind the Government to the fact that reliefs of the


kind proposed by the hon. Member for Wimbledon (Sir C. Black) and by my hon. Friend the Member for Orpington (Mr. Lubbock) are very much in the interest of the country as a whole. The small man needs to be encouraged, and what we propose is a kind of small man's charter within the Bill.
It is difficult today for a young man to set up a creative business and build capital for himself. I often think that established capital is much better looked after than creative capital even by a Socialist Government, and it is becoming more and more difficult for the young entrepreneur to set up in business. The small business of today, in a land of opportunity, is potentially the large business of tomorrow. This country has always depended in the end on the initiative, the brains and the hard work of young men of creative ability, and we should be very foolish not to encourage them to the utmost.
As the hon. Member for Cheetham said, it is socially desirable in many ways that small businesses should operate in the form of limited liability companies, and they should not be discouraged. Where would a Nuffield of today be with the restrictions which would be put on such a potential enterpreneur in modern society? This is not a partisan point at all. The Government ought to be anxious, even if they are not, to give all possible encouragement to the small businessman and to give him reliefs which are not available to the larger established businesses.
As we have heard, it would be possible to manipulate small companies in order to avoid tax, but these problems can be met if the Clauses are drafted carefully and if proper advice is taken. But even if one or two might slip through the net, that is no reason for making things very difficult for small businesses.

Mr. Percy Holman: hesitate to intervene on this occasion, and I must declare a personal interest in that I am associated with a close business and with an open one. In examining the position, as far as I can understand it, under the terms of the Finance Bill, I find that the open business will not be seriously affected but the close business will be unless it changes its whole policy.
About three weeks ago, I wrote to my hon. Friend the Chief Secretary and gave him a simplified case, dealing purely with a profit of £1,000, to make the point of my question clear. He replied that I was correct on a theoretical basis, but he said:
the practical position for the vast majority of small companies will be very different. The reason is that, as I expect you know, companies making profits at this level are normally small family businesses with nearly all their shares held by the people actively engaged in running them, either as directors or as employees. Generally speaking, their remuneration as working directors and as employees will provide them with all the personal income which they expect to receive from the business, and it would be unusual with profits of that order for dividends to be paid as well. In general, therefore, these small companies will pay corporation tax on their profits and nothing more.
In other words, what is not distributed as salaries, that is, the small remainder, will pay 8s. in the £ as against 8s. 3d., perhaps, and that means that out of the £100 or £200 which might be left in the business to accumulate as reserve—the firm would save a matter of £1 10s. or £2.

The Temporary Chairman (Sir Harry Legge-Bourke): I am sorry to have to interrupt the hon. Gentleman, but the Amendments now being discussed by the Committee all concern only the actual rate at which the tax should be levied and possible variations in the rate rather than the principle of whether the tax should be levied at all.

Mr. Holman: I was really coming to that point, Sir Harry, after my illustration—

Sir Douglas Glover: On a point of order, Sir Harry. The Amendment would provide that the first £2,000 should be exempt from taxation. As the hon. Gentleman is citing a case below £2,000, is that not in order?

The Temporary Chairman: I agree that that point could be made, but, as I heard it, that was not the point which the hon. Gentleman was making.

Mr. Holman: I was, perhaps, giving a rather full description of a company—it might be said to be somewhat hypothetical—and I took a round figure below £2,000 as an illustration of the point which I was about to make.
What is the effect of the proposals in the Amendments as compared with the effect of the Bill's provisions on a company of this description? In the last financial year, Income Tax at 7s. 9d. in the £ would amount to £388 10s. Under the proposals in the Bill as it stands, with Corporation Tax at 40 per cent., the charge would be £647 10s. If the proposals in these Amendments were adopted, the corresponding figure would be only £412 10s., that is to say, taking in the 6d. increase in Income Tax, with no Corporation Tax affecting it at all.
I gather that my hon. Friends the Member for Manchester, Cheetham (Mr. Harold Lever) and the Chief Secretary think that the bulk of companies of this character will not be affected. In my own trade association, I have made various inquiries, and I find that a large proportion of such firms—95 per cent., I would say make less than £12,000 a year profit, and a great many of them extend well beyond immediate family, relations and friends.

Mr. Harold Lever: I must have made myself badly misunderstood if my hon. Friend thought that I said that these companies were not affected. I expressed sympathy with the purpose of the Amendments, but I thought that its terms were too wide precisely because there are many companies which would be affected by these provisions.

Mr. Holman: Perhaps I use rather too strong an expression, but I understood my hon. Friend to say that he thought that small concerns would be affected to only a minor extent.
Many of these companies will find it very difficult to abolish their policy of paying dividends, which they would almost certainly have to do under the Bill unless it is amended in accordance with this series of Amendments. There is the need to pay some dividends to friends and others in these small private companies. In many cases, however, they could save on the present basis of taxation by distributing the whole of their profits as salaries to their members, thus getting the advantage of the earned income allowance.
So the Revenue could, in certain circumstances, lose through driving many businesses to adopt that method. It would apply to all those companies. I would

strongly favour a progressive, graduated Corporation Tax on smaller companies.

5.15 p.m.

Mr. Raymond Gower: The Minister has heard a series of very effective pleas for a concession along the lines of the Amendment of my hon. Friend the Member for Wimbledon (Sir C. Black) and the hon. Member for Orpington (Mr. Lubbock). The Minister has no portfolio, but he has today an assignment and an opportunity. He has an opportunity to remove the fears from the minds of a very large number of small businessmen and the directors of small or modest-size companies. It may be that those fears have been exaggerated; it may be that some of them have little or no basis; but I can assure the hon. Gentleman those those fears are fairly widespread.
Typical of those fears was a remark of a constituent of mine who is by no means a supporter of the party on this side of the Committee. He asked me whether I thought that the Government had any real future in mind for the small company. He was beginning to think that the Government had no place in their economy for companies of this size.
There is also the uneasy suspicion, which is fairly widely disseminated, that the Government are using this tax to the definite disadvantage of some of the smaller companies. The principle which has been asked has already been in practice in the application of Profits Tax. Indeed, I should have thought that the principle of a large company benefitting, and a smaller company paying, in effect, more, is the complete antithesis of Socialism. I should have thought that those on that side of the Committee who have always said that the broadest shoulders should bear the greatest weight would not have been putting forward a system under which the exact reverse is the case. Surely they should eagerly grasp this opportunity of enabling the larger companies to fare not so well and the smaller companies to derive maximum benefit.
I do not think that my hon. Friend the Member for Wimbledon, who stated his case with such clarity and benefit, is committed to the exact details of this Amendment. Likewise, the hon. Member for Orpington said he was not committed


to the exact wording of his. I really think that my hon. Friend was in one respect too kind when he posed his case. Of the basis of the present wording I think that he used the word "infamous".

Mr. Harold Lever: "Iniquitous".

Mr. Gower: Yes, he used the word "iniquitous", but it is also infamous, and I hope that the iniquitous part will be removed, by the acceptance by the Minister without Portfolio of the broad principle. He could easily, as has been already suggested, find a form of words in due course to close any gap.
The suggestion has been made that smaller companies can overcome this difficulty by the profits being largely distributed to directors. I should have thought that most undesirable, absolutely undesirable for the effectiveness of those businesses, and, of course, it is the exact opposite of the proposal for some of the very large companies. The very good example which my hon. Friend posed will, I hope, be considered by the Minister. I hope that he will consider in how many cases those smaller companies pay through allotting shares to some members of the family or relations who have invested a small amount of money.
I have not the slightest doubt that we on this side will support the principle of these Amendments. We hope that the Minister will accept the principle, even if he cannot accept the details.

Sir Eric Fletcher: Perhaps it will be of assistance to the Committee if I intervene at this stage to reply to the very large number of speeches we have already had. The hon. Member for Wimbledon (Sir C. Black) began by saying that he would move his Amendment in a moderate, reasonable, brief speech, which he did and most other hon. Members have followed his example, and I shall try to emulate them.
I should like to begin by assuring my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) and others who have spoken that the Government are by no means unsympathetic to the problems and the claims of the small man and the small trader. We are very conscious of their problems and their difficulties, and anxious to hold the balance fairly between them and all other sections of the community. I can assure

my hon. Friend that it would not be for any technical reason that the Government feel obliged to comment adversely on the proposals now before the Committee.
It is, of course, perfectly true, as my hon. Friend the Member for Cheetham knows, that there has been a certain amount of tax avoidance under the Profits Tax. A number of people conducting large businesses have found it convenient, instead of conducting their own business in one company, to form a large number of small companies so that each small company could obtain the benefits of the relief under the Profits Tax. It is not on that ground that I must, for reasons I shall give, invite the Committee to resist this Amendment.
The hon. Member for Wimbledon gave a number of figures and I will give only two, in answer to the hon. Member for Orpington (Mr. Lubbock). The hon. Member for Wimbledon's case was that small companies will be worse off under this Bill because they will lose the relief which they formerly had from Profits Tax. Then he proceeded to give a large number of figures. What he omitted to give was the comparable figures showing how much better off they will be if the proposals in his Amendment were accepted. I think that he must realise that his proposals would give small companies far more generous and favourable treatment than ever they had under the Profits Tax. Therefore, I would suggest that comparison with the difference under Profits Tax should be completely ignored. There is no comparison. We are abolishing Profits Tax and substituting an entirely new tax.
In support of that point it is relevant to remind the Committee that when the Royal Commission considered this precise question of the reliefs and exemption for small companies under Profits Tax it recommended in the Majority Report—the Memorandum of Dissent shared the same view—that there was no justification for maintaining the excessive exemption and relief for small companies. That was recommended in paragraphs 556–7, and the Commission said in terms:
We therefore recommend that these provisions "—
for exemption and abatement for small companies—
should be omitted when the profits tax is recast.


This is the view which the Government take.
I was asked by the hon. Member for Orpington what would be the cost to the Exchequer of these Amendments. I think this figure is at least as relevant as all the other figures we have had showing how individual small companies would be affected. I am giving the figure to the hon. Member for Orpington. The cost to the Exchequer, if his Amendment were accepted, would be about £40 million a year. He recognised that his proposal was more modest than the proposal of the hon. Member for Wimbledon, but it may shock the Committee, particularly the hon. Member for Barry (Mr. Gower), to learn that if the hon. Member for Wimbledon's Amendment were accepted the cost to the Exchequer would be £130 million a year, if Corporation Tax is fixed at the rate of 35 per cent., and £150 million a year if Corporation Tax is fixed at 40 per cent.

Mr. Kenneth Lewis: The Minister gives a figure of £40 million. Taking that figure of £40 million, could he tell us how much of that £40 million has been a plus which has been put on the small man through the Budget?

Sir Eric Fletcher: I am not sure one can give a precise comparison, but I must insist that the answer is really nothing at all.
I think that I shall convince the Committee that there is no hardship whatever to the small trader under the proposals now before the Committee. Any fears that they may have had are, I think, grossly exaggerated. Relief from Profits Tax was a concession for which, as the Royal Commission pointed out, there was no justification either in logic or in equity, or in fiscal policy.
The Royal Commission also pointed out, as some hon. Members have indicated, that small companies are, on the whole, treated very generously by the Revenue in the fiscal arrangements. Directors are allowed to draw substantial salaries and are enabled to claim income relief on them. As many hon. Members in the Committee will know, there are a large number of small trading companies, and growing companies, of the kind we

want to encourage, which operate quite legitimately in such a way that the bulk of the profits are drawn out by the directors, and very often there is little, if any, distribution by way of dividend, and profits over and above those required for paying salaries and directors' fees are ploughed back.
Another factor is this. Whereas, therefore, I am convinced that there is no hardship on the small company under the scheme as it stands, I think that the Committee should realise that injustice would be caused to the individual trader who traded without forming a company, if this very expensive concession were granted. One must consider the comparable position of the person who forms a company to conduct his small business and gets the benefit of drawing director's fees and getting earned income relief and paying only at 40 per cent. as compared with the individual—of whom, I suppose, there are at least as many as those who form and operate small companies—who chooses not to form a company, but operates as a private trader, or perhaps as a partnership, and who, under the law as it stands and will continue, is liable to pay Income Tax and Surtax at the full rate on all his profits without any provision for retention or otherwise.
5.30 p.m.
Therefore, I do not entirely agree with the observation of my hon. Friend the Member for Cheetham. He said that the formation of companies to enable traders to operate as companies was socially desirable. I do not dissent from that. But no one is obliged to form a company, and a lot of people prefer to carry on a small business without forming a company. If an individual chooses to operate as a company and to get the very substantial advantages of company law, it would not be unreasonable if he were subject to the same rules about Corporation Tax as other companies. But, in my view, it would certainly be unfair for him to claim fiscal advantages over his neighbour and competitor who did not form a company.
While I appreciate the spirit in which the Amendment has been moved and supported by Members on both sides of the Committee, for the reasons which I have given I must ask hon. Gentlemen to reject it.

Mr. Hirst: I am not trying to compare strictly our Amendment with the Profits Tax exemption and relief. On the other hand, in judging the hon. Gentleman's argument, it would be useful if he could discover for the Committee the approximate value of the former exemption and relief from Profits Tax on such companies. While the debate is going on, could the hon. Gentleman ascertain the figure, which I am sure is readily available?

Mr. Harold Lever: Would my hon. Friend deal with the point which I made, but made very clumsily, obviously. I am in sympathy with the object of helping the small man, but nobody could possibly support the terms of the Amendment. I thought that I made that clear. Is there any objection to formulating a concession which would put the small man running a company in no better, but no worse position than if he traded on his own account and in his own name?

Mr. William Clark: We have had a very good debate, and I am delighted that my hon. Friends and hon. Members opposite have kept their remarks brief and have expressed their view with such clarity.
My hon. Friend the Member for Wimbledon (Sir C. Black) was very restrained. I know that he feels very passionately on this subject. What we have to do is to consider the present arrangement about Profits Tax in respect of which there is an exemption of £2,000 with a sliding scale of abatement up to £12,000. My hon. Friend is trying to introduce the same sort of abatement from £2,000 to £15,000 in respect of Corporation Tax.
Even the hon. Member for Manchester, Cheetham (Mr. Harold Lever), with his usual habit of agreeing with Members on both sides of the Committee at the same time, agrees that there is something in the principle which my hon. Friend advocates. The examples which my hon. Friend gave—and the Minister did not really answer them—showed clearly that the small company, when it comes into the Corporation Tax range, suffers a tremendously steep rise in taxation, whereas the rise which a large company suffers is very gradual. We are not wedded to this particular formula. The Minister has given figures of £40 million

and £130 million. This is obviously a matter which must be looked into, but I cannot understand the inflexible attitude of the Government.
The hon. Member for Cheetham, in one of his interventions, argued the question of distribution. I must remind the Committee that in the figures which my hon. Friend the Member for Wimbledon gave the profit is after directors remuneration has been taken into account. This is exactly the same principle as we have in Profits Tax. There are certain restrictions and limitations on directors salaries and it is only after they have been charged that, in the computation of Profits Tax, one starts paying the 15 per cent. The bogus point that the hon. Member for Cheetham made can be dismissed as easily as that.
The hon. Gentleman referred to the situation in which no dividends are paid. As has been pointed out, most small companies are close companies under the Bill, and they are duty bound to distribute at least 60 per cent. My hon. Friend the Member for Wimbledon gave the effect of the distribution of 60 per cent. He proved conclusively that with a distribution of 60 per cent., a £2,000 profit would have a 41 per cent. increase and a £50,000 profit would have a 2 per cent. increase.

Mr. Harold Lever: What about no distribution?

Mr. Clark: The hon. Gentleman keeps on saying, "What about no distribution?" What he does not realise is that subsequently in the Bill there are stringent provisions—more stringent than any provisions we have ever had in our fiscal system—concerning close companies. It is all very well wearing blinkers and saying that we are discussing only Clause 42 and that Clause 69 comes 27 Clauses later. Surely we should anticipate later Clauses in seeing what the effect of this Clause will be.
Partnerships have been mentioned, but they are not subjected to the same stringent regulations as there are in Clause 69 concerning close companies, the payment of interest, and so on. It would be out of order to develop that point, but I think that it is as well to mention that as reference has been made to partnerships.
The hon. Member for Orpington (Mr. Lubbock) said that he agreed with the principle. I am sure that all his colleagues in the Liberal Party and many hon. Members opposite agree with the principle. He said, quite rightly, that the formula is far too expensive and not sufficiently sophisticated but that the principle is right. I was delighted to hear the hon. Member for Cheetham give his right hon. and hon. Friends on the Front Bench notice that he would do something about the payment of interest by close companies.
I assure him that my right hon. and hon. Friends will support him in that when we reach that part of the Bill. I hope that when we reach the question of interest payments he will support his own conviction, which would be a change in this Committee. We on this side of the Committee would welcome it very much.

Mr. Lubbock: In fact, the hon. Member for Manchester, Cheetham (Mr. Harold Lever) could save himself the trouble merely by putting his name to the Amendment which we have tabled dealing with this point.

Mr. Clark: No doubt the hon. Member for Cheetham has taken note of that, and I am sure that he will be in the Table Office as soon as possible to add his name to that of other hon. Members who have signed that Amendment.
As my hon. Friend the Member for Barry (Mr. Gower) said, businessmen throughout the country, irrespective of politics, are extremely worried about the implications of the Bill, particularly as they apply to close companies. After all, there are the small businessmen. They think that they will be penalised. If the Bill goes through as it is drafted, the small man is bound to be hit very severely because of the fiscal method which the Government have adopted.
The Government are obsessed with tax avoidance. Whenever they run out of arguments, they always come back to the same point. They say that there is tax avcidance and that the Bill will close a

loophole. I cannot understand why a Corporation Tax of this magnitude and complication should be introduced to deal with tax avoidance. It is the same as the Government saying, "We know that one of these 1,000 men is dishonest. Therefore, let us put them all in goal." This is their philosophy. It is about time they stopped talking about tax avoidance.

Too often in the Bill we hear the death knell for small businessmen. It is all very well for hon. Members opposite to smirk about this, but it is a fact. The Government must be more flexible.

The Minister quoted the Royal Commission's Report. We can all quote that when it suits us. We have passed many other things in the Bill which were voted against by the Royal Commission. The Government cannot have it both ways.

The Minister, in his very courteous reply, paid lip service to the small businessman, but the small businessman wants more than lip-service from the Government.

It will be agreed on both sides that my hon. Friend's point of view has been put in a restrained and reasonable manner. The Government are being extremely unreasonable and inflexible in not saying that they will look at the question again. We are not arguing about the figures. Of course, the formula needs to be sophisticated. One would not dream of putting in something that would cost £130 million. What we do not want to do, however, is to put the small businessman in any worse position than he is before the implications of the Bill take effect.

Because the Government will not be flexible about this matter, and because they will not give an assurance at least to look at it again, I ask my right hon. and hon. Friends to divide in support of the Amendment.

Question put, That those words be there inserted:—

The Committee divided: Ayes 268, Noes 288.

Division No. 163.]
AYES
[5.41 p.m.


Agnew, Commander Sir Peter
Awdry, Daniel
Bennett, Sir Frederic (Torquay)


Alison, Michael (Barkston Ash)
Baker, W. H. K.
Bennett, Dr. Reginald (Gos &amp; Fhm)


Allan, Robert (Paddington, S.)
Balniel, Lord
Berry, Hn. Anthony


Allason, James (Hemel Hempstead)
Barber, Rt. Hn. Anthony
Biffen, John


Anstruther-Gray, Rt. Hn. Sir W.
Barlow, Sir John
Biggs-Davison, John


Astor, John
Batsford, Brian
Bingham, R. M.




Birch, Rt. Hn. Nigel
Griffiths, Eldon (Bury St. Edmunds)
Murton, Oscar


Black, Sir Cyril
Griffiths, Peter (Smethwick)
Neave, Airey


Blaker, Peter
Gurden, Harold
Nicholis, Sir Harmar


Bossom, Hn. Clive
Hall, John (Wycombe)
Nicholson, Sir Godfrey


Box, Donald
Hall-Davis, A. G. F.
Noble, Rt. Hn. Michael


Boyd-Carpenter, Rt. Hn. J.
Hamilton, Marquess of (Fermanagh)
Nugent, Rt. Hn. Sir Richard


Boyle, Rt. Hn. Sir Edward
Hamilton, M. (Salisbury)
Onslow, Cranley


Braine, Bernard
Harris, Frederic (Croydon, N.W.)
Orr, Capt. L. P. S.


Brewis, John
Harris, Reader (Heston)
Orr-Ewing, Sir Ian


Brinton, Sir Tatton
Harrison, Brian (Maldon)
Osborn, John (Hallam)


Bromley-Davenport,Lt.-Col.SirWalter
Harrison, Col. Sir Harwood (Eye)
Osborne, Sir Cyril (Louth)


Brooke, Rt. Hn. Henry
Harvey, Sir Arthur Vere (Macclesf'd)
Page, John (Harrow, W.)


Brown, Sir Edward (Bath)
Harvey, John (Walthamstow, E.)
Page, R. Graham (Crosby)


Bruce-Gardyne, J.
Harvie Anderson, Miss
Pearson, Sir Frank (Clitheroe)


Bryan, Paul
Hastings, Stephen
Percival, Ian


Buchanan-Smith, Alick
Hawkins, Paul
Peyton, John


Buck, Antony
Hay, John
Pickthorn, Rt. Hn. Sir Kenneth


Bullus, Sir Eric
Heald, Rt. Hn. Sir Lionel
Pike, Miss Mervyn


Burden, F. A.
Heath, Rt. Hn. Edward
Pitt, Dame Edith


Butcher, Sir Herbert
Hendry, Forbes
Powell, Rt. Hn. J. Enoch


Buxton, Ronald
Higgins, Terence L.
Price, David (Eastleigh)


Campbell, Gordon
Hiley, Joseph
Prior, J. M. L.


Carlisle, Mark
Hill, J. E. B. (S. Norfolk)
Quennell, Miss J. M.


Carr, Rt. Hn. Robert
Hirst, Geoffrey
Ramsden, Rt. Hn. James


Cary, Sir Robert
Hobson, Rt. Hn. Sir John
Redmayne, Rt. Hn. Sir Martin


Chataway, Christopher
Hogg, Rt. Hn. Quintin
Rees-Davis, W. R.


Chichester-Clark, R.
Hopkins, Alan
Renton, Rt. Hn. Sir David


Clark, Henry (Antrim, N.)
Hordern, Peter
Ridsdale, Julian


Clark, William (Nottingham, S.)
Hornby, Richard
Roberts, Sir Peter (Heeley)


Clarke, Brig. Terence (Portsmth, W.)
Howard, Hn. G. R. (St. Ives)
Robson Brown, Sir William


Cole, Norman
Howe, Geoffrey (Bebington)
Rodgers, Sir John (Sevenoaks)


Cooke, Robert
Hunt, John (Bromley)
Roots, William


Cooper, A. E.
Hutchison, Michael Clark
Royle, Anthony


Cooper-Key, Sir Neill
Iremonger, T. L.
Russell, Sir Ronald


Cordle, John
Irvine, Bryant Godman (Rye)
St. John-Stevas, Norman


Corfield, F. V.
Jenkin, Patrick (Woodford)
Scott-Hopkins, James


Costain, A. P.
Jennings, J. C.
Sharples, Richard


Courtney, Cdr. Anthony
Jones, Arthur (Northants, S.)
Shepherd, William


Craddock, Sir Beresford (Speithorne)
Jopling, Michael
Smyth, Rt. Hn. Brig. Sir John


Crawley, Aidan
Joseph, Rt. Hn. Sir Keith
Spearman, Sir Alexander


Crosthwaite-Eyre, Col. Sir Oliver
Kaberry, Sir Donald
Speir, Sir Rupert


Crowder, F. P.
Kerby, Capt. Henry
Stainton, Keith


Cunningham, Sir Knox
Kerr, Sir Hamilton (Cambridge)
Stanley, Hn. Richard


Curran, Charles
Kilfedder, James A.
Stodart, Anthony


Currie, C. B. H.
Kimball, Marcus
Stoddart-Scott, Col. Sir Malcolm


Dalkeith, Earl of
King, Evelyn (Dorset, S.)
Studholme, Sir Henry


Dance, James
Kirk, Peter
Talbot, John E.


Davies, Dr. Wyndham (Perry Barr)
Lagden, Godfrey
Taylor, Sir Charles (Eastbourne)


d'Avigdor-Goldsmid, Sir Henry
Lambton, viscount
Taylor, Edward M. (G'gow,Cathcart)


Dean, Paul
Lancaster, Col. C. G.
Taylor, Frank (Moss Side)


Deedes, Rt. Hn. W. F.
Langford-Holt, Sir John
Teeling, Sir William


Digby, Simon Wingfield
Lewis, Kenneth (Rutland)
Temple, John M.


Doughty, Charles
Litchfield, Capt. John
Thatcher, Mrs. Margaret


Douglas-Home, Rt. Hn. Sir Alec
Lloyd,Rt.Hn.Geoffrey (Sut'nC'dfield)
Thomas, Sir Leslie (Canterbury)


Drayson, G. B.
Lloyd, Ian (P'tsm'th, Langstone)
Thomas, Rt. Hn. Peter (Conway)


du Cann, Rt. Hn. Edward
Longbottom, Charles
Thompson, Sir Richard (Croydon, S.)


Eden, Sir John
Longden, Gilbert
Thorneycroft, Rt. Hn. Peter


Elliot, Capt. Walter (Carshalton)
Loveys, Walter H.
Tiley, Arthur (Bradford, W.)


Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Lucas, Sir Jocelyn
Tilney, John (Wavertree)


Eyre, Reginald
McAdden, Sir Stephen
Turton, Rt. Hn. R. H.


Farr, John
MacArthur, Ian
Tweedsmuir, Lady


Fell, Anthony
McLaren, Martin
van Straubenzee, W. R.


Fisher, Nigel
Maclean, Sir Fitzroy
Vaughan-Morgan, Rt. Hn. Sir John


Fletcher-Cooke, Charles (Darwen)
McMaster, Stanley
Vickers, Dame Joan


Fletcher-Cooke, Sir John (S'pton)
McNair-Wllson, Patrick
Walder, David (High Peak)


Foster, Sir John
Maginnis, John E.
Walker, Peter (Worcester)


Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Maitland, Sir John
Walker-Smith, Rt. Hn. Sir Derek


Fraser, Ian (Plymouth, Sutton)
Marples, Rt. Hn. Ernest
Walters, Dennis


Galbraith, Hn. T. G. D.
Marten, Neil
Ward, Dame Irene


Gammans, Lady
Maude, Angus
Weatherill, Bernard


Gardner, Edward
Mawby, Ray
Wells, John (Maidstone)


Gibson-Watt, David
Maxwell-Hyslop, R. J.
Whitelaw, William


Giles, Rear-Admiral Morgan
Maydon, Lt.-Cmdr. S. L. C.
Williams, Sir Rolf Dudley (Exeter)


Gilmour, Ian (Norfolk, Central)
Meyer, Sir Anthony
Wills, Sir Gerald (Bridgwater)


Gilmour, Sir John (East Fife)
Mills, Peter (Torrington)
Wilson, Geoffrey (Truro)


Glover, Sir Douglas
Mills, Stratton (Belfast, N.)
Wise, A. R.


Glyn, Sir Richard
Miscampbell, Norman
Wolrige-Gordon, Patrick


Goodhart, Philip
Mitchell, David
Wood, Rt. Hn. Richard


Goodhew, Victor
Monro, Hector
Woodhouse, Hn. Christopher


Gower, Raymond
More, Jasper
Woodnutt, Mark


Grant, Anthony
Morgan, W. G.
Wylie, N. R.


Grant-Ferris, R.
Morrison, Charles (Devizes)
Younger, Hn. George


Gresham Cooke, R.
Mott-Radclyffe, Sir Charles



Grieve, Percy
Munro-Lucas-Tooth, Sir Hugh
TELLERS FOR THE AYES:




Mr. Pym and Mr. Dudley Smith.







NOES


Abse, Leo
Galpern, Sir Myer
Mahon, Peter (Preston, S.)


Albu, Austen
Garrett, W. E.
Mahon, Simon (Bootle)


Allaun, Frank (Salford, E.)
Garrow, A.
Mallalieu, E. L. (Brigg)


Alldritt, Walter
Ginsburg, David
Mallalieu,J.P.W.(Huddersfield,E.)


Allen, Scholefield (Crewe)
Gourlay, Harry
Mapp, Charles


Armstrong, Ernest
Greenwood, Rt. Hn. Anthony
Mason, Roy


Atkinson, Norman
Gregory, Arnold
Mayhew, Christopher


Bacon, Miss Alice
Griffiths, David (Rother Valley)
Mellish, Robert


Bagier, Gordon A. T.
Griffiths, Rt. Hn. James (Llanelly)
Mendelson, J. J.


Barnett, Joel
Griffiths, Will (M'chester, Exchange)
Mikardo, Ian


Baxter, William
Grimond, Rt. Hn. J.
Millan, Bruce


Beaney, Alan
Gunter, Rt. Hn. R. J.
Miller, Dr. M. S.


Bence, Cyril
Hale, Leslie
Milne, Edward (Blyth)


Benn, Rt. Hn. Anthony Wedgwood
Hamilton, James (Bothwell)
Molloy, William


Bennett, J. (Glasgow, Bridgeton)
Hamilton, William (West Fife)
Monslow, Walter


Binns, John
Hamling, William (Woolwich, W.)
Morris, Alfred (Wythenshawe)


Bishop, E. S.
Harper, Joseph
Morris, Charles (Openshaw)


Blackburn, F.
Harrison, Walter (Wakefield)
Morris, John (Aberavon)


Blenkinsop, Arthur
Hart, Mrs. Judith
Mulley,Rt.Hn.Frederick(SheffieldPk)


Boardman, H.
Hattersley, Roy
Murray, Albert


Boston, T. G.
Hazell, Bert
Neal, Harold


Bottomley, Rt. Hn. Arthur
Healey, Rt. Hn. Denis
Newens, Stan


Bowden, Rt. Hn. H. W. (Leics S. W.)
Henderson, Rt. Hn. Arthur
Noel-Baker, Francis (Swindon)


Bowen, Roderic (Cardigan)
Herbison, Rt. Hn. Margaret
Noel-Baker,Rt.Hn.Philip(Derby,S.)


Boyden, James
Hill, J. (Midlothian)
Norwood, Christopher


Braddock, Mrs. E. M.
Hobden, Dennis (Brighton, K'town)
Oakes, Gordon


Bradley, Tom
Holman, Percy
Ogden, Eric


Bray, Dr. Jeremy
Hooson, H. E.
O'Malley, Brian


Broughton, Dr. A. D. D.
Horner, John
Oram, Albert E. (E. Ham, S.)


Brown, Hugh D. (Glasgow, Provan)
Houghton, Rt. Hn. Douglas
Orbach, Maurice


Buchan, Norman (Renfrewshire) W.)
Howarth, Harry (Wellingborough)
Orme, Stanley


Buchanan, Richard
Howarth, Robert L. (Bolton, E.)
Oswald, Thomas


Butler, Herbert (Hackney, C.)
Howell, Denis (Small Heath)
Owen, Will


Butler, Mrs. Joyce (Wood Green)
Howie, W.
Padley, Walter


Callaghan, Rt. Hn. James
Hoy, James
Page, Derek (King's Lynn)


Carmichael, Neil
Hughes, Cledwyn (Anglesey)
Paget, R. T.


Carter-Jones, Lewis
Hughes, Emrys (S. Ayrshire)
Palmer, Arthur


Castle, Rt. Hn. Barbara
Hughes, Hector (Aberdeen, N.)
Pannell, Rt. Hn. Charles


Chapman, Donald
Hunter, Adam (Dunfermline)
Pargiter, G. A.


Coleman, Donald
Hunter, A. E. (Feltham)
Park, Trevor (Derbyshire, S.E.)


Conlan, Bernard
Hynd, H. (Accrington)
Parker, John


Corbet, Mrs. Freda
Irving, Sydney (Dartford)
Parkin, B. T.


Cousins, Rt. Hn. Frank
Jackson, Colin
Pavitt, Laurence


Craddock, George (Bradford, S.)
Jay, Rt. Hn. Douglas
Pearson, Arthur (Pontypridd)


Crawshaw, Richard
Jeger, George (Goole)
Peart, Rt. Hn. Fred


Cronin, John
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Pentland, Norman


Crosland, Rt. Hn. Anthony
Jenkins, Hugh (Putney)
Perry, Ernest G.


Cullen, Mrs. Alice
Jenkins, Rt. Hn. Roy (Stechford)
Popplewell, Ernest


Dalyell, Tam
Johnson, Carol (Lewisham, S.)
Prentice, R. E.


Darling, George
Johnson,James(K'ston-on-Hull,W.)
Price, J. T. (Westhoughton)


Davies, G. Elfed (Rhondda, E.)
Johnston, Russell (Inverness)
Probert, Arthur


Davies, Harold (Leek)
Jones, Dan (Burnley)
Pursey, Cmdr. Harry


Davies, Ifor (Gower)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Randall, Harry


Delargy, Hugh
Jones, J. Idwal (Wrexham)
Rankin, John


Dell, Edmund
Jones, T. W. (Merioneth)
Redhead, Edward


Dempsey, James
Kelley, Richard
Rees, Merlyn


Diamond, John
Kenyon, Clifford
Reynolds, G. W.


Dodds, Norman
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Rhodes, Geoffrey


Doig, Peter
Kerr, Dr. David (W'worth, Central)
Richard, Ivor


Donnelly, Desmond
Lawson, George
Roberts, Albert (Normanton)


Driberg, Tom
Leadbitter, Ted
Roberts, Goronwy (Caernarvon)


Duffy, Dr. A. E. P.
Ledger, Ron
Robertson, John (Paisley)


Dunn, James A.
Lee, Rt. Hn. Frederick (Newton)
Rodgers, William (Stockton)


Dunnett, Jack
Lee, Miss Jennie (Cannock)
Rogers, George (Kensington, N.)


Edwards, Rt. Hn. Ness (Caerphilly)
Lever, Harold (Cheetham)
Rose, Paul B.


English, Michael
Lewis, Arthur (West Ham, N.)
Ross, Rt. Hn. William


Ennals, David
Lewis, Ron (Carlisle)
Rowland, Christopher


Ensor, David
Lipton, Marcus
Sheldon, Robert


Evans, Albert (Islington, S.W.)
Lomas, Kenneth
Shinwell, Rt. Hn. E.


Evans, loan (Birmingham, Yardley)
Loughlin, Charles
Shore, Peter (Stepney)


Fernyhough, E.
Lubbock, Eric
Short,Rt.Hn.E(N'c'tle-on-Tyne,C.)


Finch, Harold (Bedwellty)
Mabon, Dr. J. Dickson
Silkin, John (Deptford)


Fitch, Alan (Wigan)
McCann, J.
Silken, S. C. (Camberwell, Dulwich)


Fletcher, Sir Eric (Islington, E.)
MacColl, James
Silverman, Julius (Aston)


Fletcher, Ted (Darlington)
MacDermot, Niall
Skeffington, Arthur


Fletcher, Raymond (Ilkeston)
McGuire, Michael
Slater, Joseph (Sedgefield)


Floud, Bernard
Mclnnes, James
Small, William


Foley, Maurice
McKay, Mrs. Margaret
Smith, Ellis (Stoke, S.)


Foot, Sir Dingle (Ipswich)
Mackenzie, Alasdair (Ross&amp;Crom'ty)
Solomons, Henry


Foot, Michael (Ebbw Vale)
Mackenzie, Gregor (Rutherglen)
Soskice, Rt. Hn. Sir Frank


Ford, Ben
Mackie, John (Enfield, E.)
Steel, David (Roxburgh)


Fraser, Rt. Hn. Tom (Hamilton)
McLeavy, Frank
Stonehouse, John


Freeson, Reginald
MacPherson, Malcolm
Stones, William







Strauss, Rt. Hn. G. R. (Vauxhall)
Varley, Eric G.
Williams, Alan (Swansea, W.)


Summerskill, Hn. Dr. Shirley
Wainwright, Edwin
Williams, Clifford (Abertillery)


Swain, Thomas
Walden, Brian (All Saints)
Williams, Mrs. Shirley (Hitchin)


Swingler, Stephen
Walker, Harold (Doncaster)
Williams, W. T. (Warrington)


Symonds, J. B.
Wallace, George
Willis, George (Edinburgh, E.)


Taylor, Bernard (Mansfield)
Warbey, William
Wilson, Rt. Hn. Harold (Huyton)


Thomas, George (Cardiff, W.)
Watkins, Tudor
Wilson, William (Coventry, S.)


Thomson, George (Dundee, E.)
Weitzman, David
Winterbottom, R. E.


Thornton, Ernest
Wells, William (Walsall, N.)
Woodburn, Rt. Hn. A.


Thorpe, Jeremy
White, Mrs. Eirene
Woof, Robert


Tinn, James
Whitlock, William
Wyatt, Woodrow


Tomney, Frank
Wigg, Rt. Hn. George



Tuck, Raphael
Wilkins, W. A.
TELLERS FOR THE NOES:


Urwin, T. W.
Willey, Rt. Hn. Frederick
Mrs. Slater and Mr. Grey.

The Temporary Chairman: Before calling the next Amendment—No. 549, in the name of the Chancellor of the Exchequer—I think that it would be for the convenience of the Committee to discuss, at the same time, Amendment No. 561, in Clause 62, page 78, line 29, at end insert "and capital gains tax".

The Chief Secretary to the Treasury (Mr. John Diamond): Did I hear you suggest that we should take also Amendment No. 561, Sir Harry? Was that intended to be Amendment No. 651, in page 50, line 27 after "association" to insert "except a nationalised industry"?

The Temporary Chairman: According to my advice, it is Amendment No. 561, on page 2826 of the Notice Paper.

Mr. Anthony Barber: That is also the advice which received earlier today, Sir Harry.

Mr. Diamond: I beg to move Amendment No. 549, in page 50, line 22, at the end, to insert:
(4) A company shall not be chargeable to capital gains tax in respect of gains accruing to it so that it is chargeable in respect of them to corporation tax or would be so chargeable but for an exemption from corporation tax.
This is a purely clarificatory Amendment. It does not affect the substance. It makes it clear that chargeable gains cannot be taxed twice. It was clear under an earlier Clause, but to make sureness doubly sure it is being repeated.

Mr. Barber: I hope that the Chief Secretary will give an explanation of the second Amendment, No. 561, which we are also discussing. Although it concerns a small point, it is an important one concerning the tax liability of local authorities. If the two Amendments are being discussed together, we shall not have a further opportunity of discussing the second when we come to it.
If the Chief Secretary is hesitant, perhaps it will help our proceedings if I say a brief word on Amendment No. 549. The purpose, I understand, is to avoid double taxation in respect of chargeable gains. The whole Committee will be pleased that the Chief Secretary has at last come round to our point of view, and we accept the proposal with gratitude and magnanimity.
The second Amendment which we are also discussing raises the whole question of taxation of local authorities. There may well be certain questions about this which we shall wish to raise, particularly concerning local authorities which engage in pure trading activities in competition with other traders who are liable to Income Tax and Capital Gains Tax or to Corporation Tax.

Mr. Diamond: On a point of order. The reason why I asked you earlier, Sir Harry, the number of the Amendment to which you were referring was that I had in mind Amendment No. 651, which refers to the present Clause. I now gather that you propose that we should take Amendment No. 561, which refers to Clause 62. If I gathered that you were asking the Committee whether it would be convenient for that one to be taken at the same time as No. 549, I should not have thought that it was for the convenience of the Committee so to do.

The Temporary Chairman: Amendment No. 651 has been selected for separate debate. The Chair is seeking only to act for the convenience of the Committee. If the Committee does not wish to discuss the two Amendments together, there is no obligation to do so. It must be for the Committee to decide whether it wishes to couple the two together. If so, the Chair is ready to agree.

Mr. Barber: I was prepared to do so, Sir Harry, but if it would be for the convenience of the Chief Secretary to defer


discussion of Amendment No. 561 until we reach it in the normal course of events, I gladly accede to that suggestion.

The Temporary Chairman: That would be agreeable and in order if it is the wish of the Committee. So be it.

Amendment agreed to.

6.0 p.m.

Mr. Lubbock: I beg to move Amendment No. 651, in page 50, line 27, after "association", to insert "except a nationalised industry".
This is quite a simple matter and I hope that we can dispose of it quickly. The position is that at the moment nationalised industries are subject to both Income Tax and Profits Tax. I put it to the Chief Secretary that the calculations which are imposed upon them because of that liability are pointless, because the charge of Income Tax and Profits Tax does not arise because of their capital investment programme. Therefore, there are many people working out the tax liability when not a penny is to accrue to the Chancellor of the Exchequer. It would be interesting to know how many people there are in the various nationalised industries who are engaged in this sterile work of calculating tax when no tax is the result. It is time that we rectified that situation and relieved the nationalised industries from their liability to the new Corporation Tax.
The local authorities are specifically exempt from Corporation Tax under Clause 62 and I believe that they were not exempt from Income Tax under previous legislation. A new advantage is now to be given to them. There is an analogy between the position of the local authorities and that of the nationalised industries in that both are for public purposes. There is no question of any profit accruing to any private individual and the whole of the capital of nationalised industries is in the hands of the State, apart from some loan money which is left over from the nationalisation provisions and which will disappear from the balance sheets over a number of years.
The replacement of Income Tax and Profits Tax may result in a tax liability for the nationalised industries which they have not had to pay in the past, because the value of their investment allowances has been considerably reduced by the new tax. Although this has not happened so

far, the last Annual Report of the Electricity Council says that the Council pays tax on behalf of the C.E.G.B. and the electricity boards and it says that the electricity supply industry will continue to be subject to assessment for Income Tax and Profits Tax in the same way as industry generally, but that, in view of the heavy programme of new investment, the Council did not expect a tax liability to emerge for many years. I am paraphrasing paragraph 46 of that Report.
With the advent of the Corporation Tax and the extremely heavy capital investment programmes of the nationalised industries, in the region of £370 million for the Central Electricity Generating Board alone, there might be a liability in future years. It would not be public policy to require the nationalised industries to pay such taxes. For all those reasons I hope that the Chief Secretary will give favourable consideration to the Amendment.

Mr. Diamond: I will, of course, give very careful consideration to what the hon. Member for Orpington (Mr. Lubbock) has said, but I am bound to say that I am not convinced by his arguments. The philosophy of the Government is not different from that of the previous Government—I do not want to put words into their mouths—and is that, by and large, nationalised industries should be treated as commercial concerns, should have certain commercial targets and should, while recognising their other responsibilities, take full account of their commercial responsibilities and, as every other commercial undertaking is subject to Corporation Tax, so should the nationalised industries be so subject.

Mr. Barber: Broadly speaking, I agree with what the Chief Secretary has just said. I sympathise with the hon. Member for Orpington (Mr. Lubbock), who pointed out the disparity of treatment between nationalised industries and local authorities. I shall not pursue that now, because we shall be able to return to this matter when we reach the Clause dealing with local authorities, but it is a little odd that a local authority carrying on a trade in direct competition with a private trader, who is liable to Income Tax and Capital Gains Tax and Corporation Tax, should be exempt from all those taxes. Nevertheless, leaving that


out of account for the moment, I agree with the Chief Secretary's approach to the nationalised industries.

Mr. William Shepherd: I have no sympathy whatever with the Amendment and I do not even share the view of my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) that it is in any way justified by the position of local authorities. It is true that local authorities have a marginal trading activity and there is some reason for saying that they should not benefit in the manner in which the Government are proposing, but to say that nationalised industries, which are subject to all the tendencies to inertia inevitable in monopoly, should be freed from even this remote stimulus of the need to meet a tax liability is odd coming from the so-called Liberals. This Amendment is a disgrace to the Liberal Party.

Mr. Lubbock: Would the hon. Gentleman explain how it can possibly come as a stimulus to a nationalised industry when it has not paid the tax?

Mr. Shepherd: If the hon. Gentleman had been following my words closely he would have heard that I said however remote the stimulus was. If he projects his mind forward a little, he may realise that the time may come when the capital expenditure of the nationalised industries in relation to their revenue will be very much lower than it is now. It is certainly true of electricity, for example. It is quite proper that we should actively urge on the nationalised industries the best sort of commercial basis on which to operate, but to say that they should be free of a responsibility which is that of every other trading organisation is an absurd piece of distorted Liberal reasoning.

Mr. Lubbock: That was the sort of speech which I would have expected from the hon. Member for Cheadle (Mr. Shepherd), who has obviously not given the matter any thought. He makes the sort of party political speeches which are completely out of place on a matter of this kind. I wish that we could approach these issues on a non-doctrinaire basis and consider what we are doing when we impose these taxes on the nationalised industries.
I was deeply disappointed with the Chief Secretary's reply. He knows a great deal better than that. He did not condescend to say anything about how many people are employed on these calculations in the Electricity Council, the National Coal Board and the other bodies concerned. What conceivable benefit can it be to the economy, or to the nationalised industries themselves, that people should solemnly sit down to do complicated calculations of tax liability when, in fact, according to the passage from the Annual Report which I quoted, these industries do not pay a single penny in tax?
The hon. Gentleman completely ignored what I said about the effect of the Corporation Tax on the liability of the nationalised industries in future years. Their expenditure programmes are so large that their investment allowances have wholly swallowed up their tax liability in the past, but this will not be the case in future. This additional liability will be placed on these industries.

Mr. Harold Lever: Would the hon. Gentleman say in which respect this is so? In what way are the Government depreciating the value of the investment allowances to the nationalised industries? He is absolutely wrong and he should give some argument in support of such an extraordinary proposition.

Mr. Charles Fletcher-Cooke: If the Amendment is passed, they will still be subject to Income Tax. The Amendment merely relieves them of Corporation Tax. Does the hon. Member for Orpington (Mr. Lubbock) want to subject them to Income Tax, which is the effect of defining "company" by excluding the nationalised industries?

Mr. Lubbock: The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) will appreciate that a company will pay Income Tax only by reason of withholding tax on its distributions. I hope that the hon. Gentleman is not suggesting that nationalised industries will pay ordinary dividends after the Bill becomes law.
I would be out of order if I pursued this argument, but there might be something to be said for reorganising the financial structure of the nationalised industries so that some of the capital held


by the Government was in the form of equities at fixed interest, which would meet the argument of the hon. Member for Cheadle that they should adhere to the most competitive conditions obtaining in outside industry and be required to make distributions according to their profits.
But that is not what we are talking about. We are talking about whether they should be subject to Corporation Tax. I have suggested three good reasons for making the Amendment and the Chief Secretary completely ignored them. I do not think that during the whole of our debates on the Bill so far I have heard him make a shorter speech or one with so little content. Unless the hon. Gentleman can give a better answer than he has done so far, I shall have to advise my hon. Friends to press this matter to a Division.

Mr. Diamond: I respond only to assure the hon. Gentleman that there is no question of discourtesy. I spoke briefly, following the general pattern set by hon. Members on both sides of the Committee of making short speeches, but I thought that I had dealt with the essence of the matter. If the hon. Gentleman wants me to deal with the matter more fully, perhaps I might do so in a few short sentences.
First, the Amendment is faulty in definition. There is no such definition as a nationalised industry, but I think that I know what the hon. Gentleman means. Secondly, the hon. Gentleman is wrong in fact in saying that the nationalised industries do not pay tax. Thirdly, it is not true to say that there is a complication in working out the tax liability, and, therefore, there is no real wasted time to be compensated for there. Fourthly, the essential point is that having given the nationalised industries full recognition as commercial organisations in competition with other commercial organisations, it would be wrong to treat them differently.
I do not know whether it is sufficiently realised how widespread this competition is with non-nationalised and privately-owned firms, in a variety of fields. Almost every nationalised industry is in some form of competition, either directly or indirectly.
Surely, in those circumstances, it would not be right to say that a privately-

owned firm should bear the responsibility of paying Corporation Tax which would deplete its reserves, prevent it from ploughing back, and prevent it from growing as fast as a nationalised industry? How can it be right to say that a private firm should bear this tax, but that a nationalised industry with which it is in direct competition, should not?
One has to give full weight—and I repeat this for the third time lest I should be misunderstood—to the social and other responibilities, but I think that it is right to continue the present pattern under which, as trading organisations, the nationalised industries bear a like responsibility. Only in that way will we know that there is no maldistribution of resources, having regard to the work of the nationalised industries.

Mr. Gower: Without using the strong language used by my hon. Friend the Member for Cheadle (Mr. Shepherd), may I say that the hon. Member for Orpington (Mr. Lubbock) has, I think, put forward a most illiberal suggestion. If we were ever to join the European Community, there might be serious objections to the principle which he has enunciated, because I cannot see how a British nationalised airways corporation, having a different basis of taxation from all other companies here, could fit into the terms of the European Community.

Mr. Patrick Jenkin: I am the only Member of the House who has ever had to argue this question before the Court of Appeal, and it may comfort the hon. Member for Orpington (Mr. Lubbock) to know that on that occasion he had the support of one of Her Majesty's learned Lord Justices who said that the National Coal Board was just another Government Department, and asked me why I wanted leave to appeal to the House of Lords. I had to argue that the Board was subject to tax by Act of Parliament, and quite rightly so, and in the end we were given leave to appeal to the House of Lords.
I support what has been said by my hon. Friends. Of course the nationalised industries must be subject to tax, otherwise competition between them will be hideously distorted and grossly unfair to private companies.

Question put, That those words be there inserted:—

The Committee divided: Ayes 7, Noes 280.

Division No. 164.]
AYES
[6.14 p.m.


Bessell, Peter
Mackenzie, Alasdair (Ross&amp;Crom'ty)
TELLERS FOR THE AYES:


Bowen, Roderic (Cardigan)
Steel, David (Roxburgh)
Mr. Lubbock and


Grimond, Rt. Hn. J.
Thorpe, Jeremy
Mr. Russell Johnston.


Hooton, H. E.






NOES


Abse, Leo
Fitch, Alan (Wigan)
Lee, Rt. Hn. Frederick (Newton)


Albu, Austen
Fletcher, Sir Eric (Islington, E.)
Lee, Miss Jennie (Cannock)


Allaun, Frank (Salford, E.)
Fletcher, Ted (Darlington)
Lever, Harold (Cheetham)


Alldritt, Walter
Fletcher, Raymond (Ilkeston)
Lewis, Arthur (West Ham, N.)


Allen, Scholefield (Crews)
Floud, Bernard
Lewis, Ron (Carlisle)


Armstrong, Ernest
Foley, Maurice
Lipton, Marcus


Atkinson, Norman
Foot, Sir Dingle (Ipswich)
Lomas, Kenneth


Bacon, Miss Alice
Foot, Michael (Ebbw Vale)
Loughlin, Charles


Bagier, Gordon A. T.
Ford, Ben
Mabon, Dr. J. Dickson


Barnett, Joel
Fraser, Rt. Hn. Tom (Hamilton)
McCann, J.


Baxter, William
Freeson, Reginald
MacColl, James


Beaney, Alan
Calpern, Sir Myer
MacDermot, Niall


Bence, Cyril
Garrett, W. E.
McGuire, Michael


Benn, Rt. Hn. Anthony Wedgwood
Garrow, A.
Mclnnes, James


Bennett, J. (Glasgow, Bridgeton)
Ginsburg, David
McKay, Mrs. Margaret


Binns, John
Gourlay, Harry
Mackenzie, Gregor (Rutherglen)


Bishop, E. S.
Greenwood, Rt. Hn. Anthony
Mackie, John (Enfield, E.)


Blackburn, F.
Gregory, Arnold
McLeavy, Frank


Blenkinsop, Arthur
Griffit[...]hs, David (Rother Valley)
MacPherson, Malcolm


Boardman, H.
Griffiths, Rt. Hn. James (Llanelly)
Mahon, Peter (Preston, S.)


Boston, T. G.
Griffiths, Will (M'chester, Exchange)
Mahon, Simon (Bootle)


Bottomley, Rt. Hn. Arthur
Cunter, Rt. Hn. R. J.
Mallalieu, E. L. (Brigg)


Bowden, Rt. Hn. H. W. (Leics S.W.)
Hale, Leslie
Mallalieu,J.P.W.(Huddersfield,E.)


Boyden, James
Hamilton, James (Bothwell)
Mapp, Charles


Braddock, Mrs. E. M.
Hamilton, William (West Fife)
Mason, Roy


Bradley, Tom
Hamling, William (Woolwich, W.)
Mayhew, Christopher


Bray, Dr. Jeremy
Harper, Joseph
Mellish, Robert


Broughton, Dr. A. D. D.
Harris, Reader (Heston)
Mendelson, J. J.


Brown, Hugh D. (Glasgow, Provan)
Harrison, Walter (Wakefield)
Mikardo, Ian


Buchan, Norman (Renfrewshire, W.)
Hart, Mrs. Judith
Millan, Bruce


Buchanan, Richard
Hattersley, Roy
Miller, Dr. M. S.


Butler, Herbert (Hackney, C.)
Hazell, Bert
Milne, Edward (Blyth)


Butler, Mrs. Joyce (Wood Green)
Healey, Rt. Hn. Denis
Molloy, William


Callaghan, Rt. Hn. James
Henderson, Rt. Hn. Arthur
Monslow, Walter


Carmichael, Neil
Herbison, Rt. Hn. Margaret
Morris, Alfred (Wythenshawe)


Carter-Jones, Lewis
Hill, J. (Midlothian)
Morris, Charles (Openshaw)


Castle, Rt. Hn. Barbara
Hobden, Dennis (Brighton, K'town)
Morris, John (Aberavon)


Chapman, Donald
Holman, Percy
Mulley,Rt.Hn.Frederick(SheffieldPk)


Coleman, Donald
Horner, John
Murray, Albert


Conlan, Bernard
Houghton, Rt. Hn. Douglas
Neal, Harold


Corbet, Mrs. Freda
Howarth, Harry (Wellingborough)
Newens, Stan


Cousins, Rt. Hn. Frank
Howarth, Robert L. (Bolton, E.)
Noel-Baker, Francis (Swindon)


Craddock, George (Bradford, S.)
Howell, Denis (Small Heath)
Noel-Baker, Rt.Hn.Philip(Derby,S.)


Crawshaw, Richard
Howie, W.
Norwood, Christopher


Cronin, John
Hoy, James
Oakes, Gordon


Crosland, Rt. Hn. Anthony
Hughes, Cledwyn (Anglesey)
Ogden, Eric


Cullen, Mrs. Alice
Hughes, Emrys (S. Ayrshire)
O'Malley, Brian


Dalyell, Tam
Hughes, Hector (Aberdeen, N.)
Oram, Albert E. (E. Ham, S.)


Darling, George
Hunter, Adam (Dunfermline)
Orbach, Maurice


Davies, G. Elfed (Rhondda, E.)
Hunter, A. E. (Feltham)
Orme, Stanley


Davies, Harold (Leek)
Hynd, H. (Accrington)
Owen, Will


Davies, Ifor (Gower)
Irving, Sydney (Dartford)
Padley, Walter


Delargy, Hugh
Jackson, Colin
Page, Derek (King's Lynn)


Dell, Edmund
Jay, Rt. Hn. Douglas
Paget, R. T.


Dempsey, James
Jeger, George (Goole)
Palmer, Arthur


Diamond, John
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Pannell, Rt. Hn. Charles


Dodds, Norman
Jenkins, Hugh (Putney)
Pargiter, G. A.


Doig, Peter
Jenkins, Rt. Hn. Roy (Stechford)
Park, Trevor (Derbyshire, S.E.)


Donnelly, Desmond
Johnson, Carol (Lewisham, S.)
Parker, John


Driberg, Tom
Johnson,James(K'ston-on-Hull,W.)
Parkin, B. T.


Duffy, Dr. A. E. P.
Jones, Dan (Burnley)
Pavitt, Laurence


Dunn, James A.
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Pearson, Arthur (Pontypridd)


Dunnett, Jack
Jones, J. Idwal (Wrexham)
Peart, Rt. Hn. Fred


Edwards, Rt. Hn. Ness (Caerphilly)
Jones, T. W. (Merioneth)
Pentland, Norman


English, Michael
Kelley, Richard
Perry, Ernest G.


Ennals, David
Kenyon, Clifford
Popplewell, Ernest


Ensor, David
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Prentice, R. E.


Evans, Albert (Islington, S.W.)
Kerr, Dr. David (W'worth, Central)
Price, J. T. (Westhoughton)


Evans, Ioan (Birmingham, Yardley)
Lawson, George
Probert, Arthur


Fernyhough, E.
Leadbitter, Ted
Pursey, Cmdr. Harry


Finch, Harold (Bedwellty)
Ledger, Ron
Randall, Harry




Rankin, John
Small, William
Wallace, George


Redhead, Edward
Smith, Ellis (Stoke, S.)
Warbey, William


Rees, Merlyn
Solomons, Henry
Watkins, Tudor


Reynolds, G. W.
Sotkice, Rt. Hn. Sir Frank
Weitzman, David


Rhodes, Geoffrey
Stonehouse, John
Wells, William (Walsall, N.)


Richard, Ivor
Stones, William
White, Mrs. Eirene


Roberts, Albert (Normanton)
Strauss, Rt. Hn. G. R. (Vauxhall)
Whitlock, William


Roberts, Goronwy (Caernarvon)
Summerskill, Hn. Dr. Shirley
Wigg, Rt. Hn. George


Robertson, John (Paisley)
Swain, Thomas
Wilkins, W. A.


Rodgers, William (Stockton)
Swingler, Stephen
Willey, Rt. Hn. Frederick


Rogers, George (Kensington, N.)
Symonds, J. B.
Williams, Alan (Swansea, W.)


Rose, Paul B.
Taylor, Bernard (Mansfield)
Williams, Clifford (Abertillery)


Ross, Rt. Hn. William
Thomas, George (Cardiff, W.)
Williams, Mrs. Shirley (Hitchin)


Rowland, Christopher
Thomson, George (Dundee, E.)
Williams, W. T. (Warrington)


Sheldon, Robert
Thornton, Ernest
Willis, George (Edinburgh, E.)


Shinwell Rt. Hn. E.
Tinn, James
Wilson, Rt. Hn. Harold (Huyton)


Shore, Peter (Stepney)
Tomney, Frank
Wilson, William (Coventry, S.)


Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Tuck, Raphael
Winterbottom, R. E.


Silkin, John (Deptford)
Urwin, T. W.
Woodburn, Rt. Hn. A.


Silkin, S. C. (Camberwell, Dulwich)
Varley, Eric G.
Woof, Robert


Silverman, Julius (Aston)
Walnwright, Edwin
Wyatt, Woodrow


Skeffington, Arthur
Walden, Brian (All Saints)



Slater, Joseph (Sedgefield)
Walker, Harold (Doncaster)
TELLERS FOR THE NOES:




Mrs. Slater and Mr. Grey.

Mr. Barber: I beg to move Amendment No. 284, in page 50, line 28, to leave out from "income" to the end of line 30.
The purpose of the Amendment is to exclude chargeable gains from the computation of profits for the purposes of Corporation Tax. The reason is that which has been given by my right hon. and hon. Friends in the past—to avoid v% hat we consider to be the double taxation which is inherent in the Chancellor's proposals. We have already given considerable attention to this point in the previous part of the Bill, and I have no doubt that some of my hon. and right

hon. Friends will wish to return to it when we discuss Clause 51, which is concerned solely with the computation of chargeable gains.

In those circumstances, I hope that at this stage the Committee will think it reasonable that those on this side should express formally their objection to what is proposed, and return to the matter when Clause 51 is reached.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 279, Noes 274.

Division No. 165.]
AYES
[6.26 p.m.


Abuse, Leo
Cailaghan, Rt. Hn. James
Enaor, David


Albu, Austen
Carmichael, Neil
Evans, Albert (Islington, S.W.)


Allaun, Frank (Salford, E.)
Carter-Jones, Lewis
Evans, Ioan (Birmingham, Yardley)


Alldritt, Walter
Castle, Rt. Hn. Barbara
Fernyhough, E.


Allen, Scholefield (Crewe)
Chapman, Donald
Finch, Harold (Bedwellty)


Armstrong, Ernest
Coleman, Donald
Fitch, Alan (Wigan)


Atkinson, Norman
Conlan, Bernard
Fletcher, Sir Eric (Islington, E.)


Bacon, Miss Alice
Corbet, Mrs. Freda
Fletcher, Ted (Darlington)


Bagier, Gordon A. T.
Cousins, Rt. Hn. Frank
Fletcher, Raymond (Ilkeston)


Barnett, Joel
Craddock, George (Bradford, S.)
Floud, Bernard


Baxter, William
Crawshaw, Richard
Foley, Maurice


Beaney, Alan
Cronin, John
Foot, Sir Dingle (Ipswich)


Bence, Cyril
Crosland, Rt. Hn. Anthony
Foot, Michael (Ebbw Vale)


Benn, Rt. Hn. Anthony Wedgwood
Cullen, Mrs. Alice
Ford, Ben


Bennett, J. (Glasgow, Bridgeton)
Dalyell, Tam
Fraser, Rt. Hn. Tom (Hamilton)


Binns, John
Darling, George
Freeson, Reginald


Bishop, E. S.
Davies, G. Elfed (Rhondda, E.)
Galpern, Sir Myer


Blackburn, F.
Davies, Harold (Leek)
Garrett, W. E.


Blenkinsop, Arthur
Davies, Ifor (Gower)
Garrow, A.


Boardman, H.
Delargy, Hugh
Ginsburg, David


Boston, T. G.
Dell, Edmund
Gourlay, Harry


Bottomley, Rt. Hn. Arthur
Dempsey, James J
Greenwood, Rt, Hn. Anthony


Bowden, Rt. Hn. H. W. (Leics S.W.)
Diamond, John
Gregory, Arnold


Boyden, James
Dodds, Norman
Grey, Charles


Braddock, Mrs. E. M.
Doig, Peter
Griffiths, David (Rother Valley)


Bradley, Tom
Donnelly, Desmond
Griffiths, Rt. Hn. James (Llanelly)


Bray, Dr. Jeremy
Driberg, Tom
Griffiths, Will (M'chester, Exchange)


Broughton, Dr. A. D. D.
Duffy, Dr. A. E. P.
Gunter, Rt. Hn. R. J.


Brown, Hugh D. (Glasgow, Provan)
Dunn, James A.
Hale, Leslie


Buchan, Norman (Renfrewshire, W.)
Dunnett, Jack
Hamilton, James (Bothwell)


Buchanan, Richard
Edwards, Rt. Hn. Ness (Caerphilly)
Hamilton, William (West Fife)


Butler, Herbert (Hackney, C.)
English, Michael
Hamling, William (Woolwich, W.)


Butler, Mrs. Joyce (Wood Green)
Ennals, David
Harrison, Walter (Wakefield)




Hart, Mrs. Judith
Mahon, Peter (Preston, S.)
Rodgers, William (Stockton)


Hattersley, Roy
Mahon, Simon (Bootle)
Rogers, George (Kensington, N.)


Hazell, Bert
Mallalieu, E. L. (Brigg)
Rose, Paul B.


Healey, Rt. Hn. Denis
Mallalieu,J.P.W.(Huddersfield,E.)
Ross, Rt. Hn. William


Henderson, Rt. Hn. Arthur
Mapp, Charles
Rowland, Christopher


Herbison, Rt. Hn. Margaret
Mason, Roy
Sheldon, Robert


Hill, J. (Midlothian)
Mayhew, Christopher
Shinwell, Rt. Hn. E.


Hobden, Dennis (Brighton, K'town)
Mellish, Robert
Shore, Peter (Stepney)


Holman, Percy
Mendelson, J. J.
Short,Rt.Hn.E.(N'c'tie-on-Tyne,C.)


Horner, John
Mikardo, Ian
Silkin, John (Deptford)


Houghton, Rt. Hn. Douglas
Millan, Bruce
Silkin, S. C. (Camberwell, Duiwich)


Howarth, Harry (Wellingborough)
Miller, Dr. M. S.
Silverman, Julius (Aston)


Howarth, Robert L. (Bolton, E.)
Milne, Edward (Blyth)
Skeffington, Arthur


Howell, Denis (Small Heath)
Molloy, William
Slater, Joseph (Sedgefield)


Howie, W.
Monslow, Walter
Small, William


Hoy, James
Morris, Alfred (Wythenshawe)
Smith, Ellis (Stoke, S.)


Hughes, Cledwyn (Anglesey)
Morris, Charles (Openshaw)
Solomons, Henry


Hughes, Emrys (S. Ayrshire)
Morris, John (Aberavon)
So[...]kic[...], Rt. Hn. Sir Frank


Hughes, Hector (Aberdeen, N.)
Mulley,Rt.Hn.Frederick(SheffieldPk)
Stonehouse, John


Hunter, Adam (Dunfermline)
Murray, Albert
Stone[...]s, William


Hunter, A. E. (Feltham)
Neal, Harold
Strauss, Rt. Hn. G. R. (Vauxhall)


Hynd, H. (Accrington)
Newens, Stan
Summerskill, Hn. Dr. Shirley


Irving, Sydney (Dartford)
Noel-Baker, Francis (Swindon)
Swain, Thomas


Jackson, Colin
Noel-Baker,Rt.Hn.Philip(Derby,S.)
Swingler, Stephen


Jay, Rt. Hn. Douglas
Norwood, Christopher
Symonds, J. B.


Jeger, George (Goole)
Oakes, Cordon
Taylor, Bernard (Mansfield)


Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Ogden, Eric
Thomas, George (Cardiff, w.)


Jenkins, Hugh (Putney)
O'Malley, Brian
Thomson, George (Dundee, E.)


Jenkins, Rt. Hn. Roy (Stechford)
Oram, Albert E. (E. Ham, S.)
Thomson, Ernest


Johnson, Carol (Lewisham, S.)
Orbach, Maurice
Tinn, James


Johnson,James(K'ston-on-Hull,W.)
Orme, Stanley
Tomney, Frank


Jones, Dan (Burnley)
Owen, will
Tuck, Raphael


Jones,Bt.Hn.Sir Elwyn(W.Ham,S.)
Padley, Walter
Urwin, T. W.


Jones, J. Idwal (Wrexham)
Page, Derek (King's Lynn)
Varley, Eric G.


Jones, T. w. (Merioneth)
Paget, R. T.
Wainwright, Edwin


Kelley, Richard
Palmer, Arthur
Walden, Brian (All Saints)


Kenyon, Clifford
Pannell, Rt. Hn. Charles
Walker, Harold (Doncaster)


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Pargiter, G. A.
Wallace, George


Kerr, Dr. David (W'worth, Central)
Park, Trevor (Derbyshire, S.E.)
Warbey, William


Lawson, George
Parker, John
Watkins, Tudor


Leadbitter, Ted
Parkin, B. T.
Weitzman, David


Ledger, Ron
Pavitt, Laurence
Wells, William (Walsall, N.)


Lee, Rt. Hn. Frederick (Newton)
Pearson, Arthur (Pontypridd)
White, Mrs. Eirene


Lee, Miss Jennie (Cannock)
Peart, Rt. Hn. Fred
Whitlock, William


Lever, Harold (Cheetham)
Pentland, Norman
Wigg, Rt. Hn. George


Lewis, Arthur (West Ham, N.)
Perry, Ernest G.
Wilkins, W. A.


Lewis, Ron (Carlisle)
Popplewell, Ernest
Willey, Rt. Hn. Frederick


Lipton, Marcus
Prentice, R. E.
Williams, Alan (Swansea, W.)


Lomas, Kenneth
Price, J. T. (Westhoughton)
Williams, Clifford (Abertillery)


Loughlin, Charles
Probert, Arthur
Williams, Mrs. Shirley (Hitchin)


Mabon, Dr. J. Dickson
Pursey, Cmdr. Harry
Williams, W. T. (Warrington)


McCann, J.
Randall, Harry
Willis, George (Edinburgh, E.)


MacColl, James
Rankin, John
Wilson, Rt. Hn. Harold (Huyton)


MacDermot, Niall
Redhead, Edward
Wilson, William (Coventry, S.)


McGuire, Michael
Rees, Merlyn
Winterbottom, R. E.


Mclnnes, James
Reynolds, G. W.
Woodburn, Rt. Hn. A.


McKay, Mrs. Margaret
Rhodes, Geoffrey
Woof, Robert


Mackenzie, Gregor (Rutherglen)
Richard, Ivor
Wyatt, Woodrow


Mackie, John (Enfield, E.)
Roberts, Albert (Normanton)



McLeavy, Frank
Roberts, Goronwy (Caernarvon)
TELLERS FOR THE AYES:


MacPherson, Malcolm
Robertson, John (Paisley)
Mrs. Slater and Mr. Harper.




NOES


Agnew, Commander Sir Peter
Black, Sir Cyril
Button, Ronald


Alison, Michael (Barkston Ash)
Blaker, Peter
Campbell, Gordon


Allan, Robert (Paddington, S.)
Bossom, Hn. Clive
Carlisle, Mark


Allason, James (Hemel Hempstead)
Bowen, Roderic (Cardigan)
Carr, Rt. Hi). Robert


Anstruther-Gray, Rt. Hn. Sir W.
Box, Donald
Cary, Sir Robert


Astor, John
Boyd-Carpenter, Rt. Hn. J.
Chataway, Christopher


Awdry, Daniel
Boyle, Rt. Hn. Sir Edward
Chichester-Clark, R.


Baker, W. H. K.
Braine, Bernard
Clark, Henry (Antrim, N.)


Balniel, Lord
Brewis, John
Clark, William (Nottingham, S.)


Barber, Rt. Hn. Anthony
Brinton, Sir Tatton
Clarke, Brig. Terence (Portsmth, W.)


Barlow, Sir John
Bromley-Davenport,Lt.-Col.SirWalter
Cole, Norman


Batsford, Brian
Brooke, Rt. Hn. Henry
Cooke, Robert


Bennett, Sir Frederic (Torquay)
Brown, Sir Edward (Bath)
Cooper, A. E.


Bennett, Dr. Reginald (Got &amp; Fhm)
Bruce-Gardyne, J.
Cooper-Key, Sir Neill


Berry, Hn. Anthony
Bryan, Paul
Cordle, John


Bessell, Peter
Buchanan-Smith, Alick
Corfield, F. V.


Biffen, John
Buck, Antony
Costain, A. P.


Biggs-Daviton, John
Bullus, Sir Eric
Courtney, Cdr. Anthony


Bingham, R. M.
Burden, F. A.
Craddock, Sir Beresford (Spelthorne)


Birch, Rt. Hn. Nigel
Butcher, Sir Herbert
Crawley, Aidan







Crosthwaita.Eyre, Col. Sir Oliver
Hornby, Richard
Peyton, John


Crowder, F. P.
Howard, Hn. G. R. (St. Ives)
Pickthorn, Rt. Hn. Sir Kenneth


Cunningham, Sir Knox
Howe, Geoffrey (Bebington)
Pike, Miss Mervyn


Curran, Charles
Iremonger, T. L.
Pitt, Dame Edith


Currie, G. B. H.
Irvine, Bryant Godman (Rye)
Powell, Rt. Hn. J. Enoch


Dalkeith, Earl of
Jenkin, Patrick (Woodford)
Price, David (Eastleigh)


Dance, Jamas
Jennings, J. C.
Prior, J. M. L.


Davies, Dr. Wyndham (Perry Barr)
Johnston, Russell (Inverness)
Quennell, Miss J. M.


d'Avigdor-Goldsmid, Sir Henry
Jones, Arthur (Northants, S.)
Ramsden, Rt. Hn. James


Dean, Paul
Jopling, Michael
Redmayne, Rt. Hn. Sir Martin


Deedes, Rt. Hn. W. F.
Joseph, Rt. Hn. Sir Keith
Rees-Davies, W. R.


Digby, Simon Wingfield
Kaborry, sir Donald
Renton, Rt. Hn. Sir David


Doughty, Charles
Kerby, Capt. Henry
Ridsdale, Julian


Douglas-Home, Rt. Hn. Sir Alec
Kerr, Sir Hamilton (Cambridge)
Roberts, Sir Peter (Heeley)


Drayson, G. B.
Kilfedder, James A.
Robson Brown, Sir William


du Cann, Rt. Hn. Edward
Kimball, Marcus
Rodgers, Sir John (Sevenoaks)


Eden, Sir John
King, Evelyn (Dorset, S)
Roots, William


Elliot, Capt. Walter (Carshalton)
Kirk, Peter
Royle, Anthony


Eyre, Reginald
Lagden, Godfrey
Russell, Sir Ronald


Farr, John
Lambton, viscount
St. John-Stevas, Norman


Fell, Anthony
Lancaster, Col. C. G.
Scott-Hopkins, James


Fisher, Nigel
Langford-Holt, Cir John
Sharpies, Richard


Fletcher-Cooke, Charles (Darwen)
Lewis, Kenneth (Rutland)
Shepherd, William


Fletcher-Cooke, Sir John (S'pton)
Litchfield, Capt. John
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Foster, Sir John
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Smyth, Rt. Hn. Brig. Sir John


Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Lloyd, Ian (P'tsm'th, Langstone)
Spearman, Sir Alexander


Fraser, Ian (Plymouth, Sutton)
Longbottom, Charles
Speir, Sir Rupert


Gammans, Lady
Longden, Gilbert
Stainton, Keith


Gardner, Edward
Loveys, Walter H.
Stanley, Hn. Richard


Gibson-Watt, David
Lubbock, Eric
Steel, David (Roxburgh)


Giles, Rear-Admiral Morgan
Lucas, Sir Jocelyn
Stodart, Anthony


Gilmour, Ian (Norfolk, Central)
McAdden, Sir Stephen
Stoddart-Scott, Col. Sir Malcolm


Cilmour, Sir John (East Fife)
MacArthur, Ian
Studholme, Sir Henry


Glover, Sir Douglas
Maclenzie, Alasdair (Ross&amp;Crom'ty)
Talbot, John E.


Glyn, Sir Richard
McLaren, Martin
Taylor, Sir Charles (Eastbourne)


Goodhart, Philip
Maclean, Sir Fitzroy
Taylor, Edward M. (G'gow,Cathcart)


Goodhew, Victor
McMaster, Stanley
Taylor, Frank (Moss Side)


Cower, Raymond
McNair-Wilson, Patrick
Teeling, Sir William


Grant, Anthony
Maginnis, John E.
Temple, John M.


Grant-Ferris, R.
Maitland, Sir John
Thatcher, Mrs. Margaret


Gresham Cooke, R.
Marples, Rt. Hn. Ernest
Thomas, Sir Leslie (Canterbury)


Grieve, Percy
Marten, Neil
Thomas, Rt. Hn. Peter (Conway)


Griffiths, Eldon (Bury St. Edmunds)
Maude, Angus
Thompson, Sir Richard (Croydon, S.)


Criffiths, Peter (Smethwick)
Mawby, Ray
Thorneycroft, Rt. Hn. Peter


Crimond, Rt. Hn. J.
Maxwell-Hyslop, R. J.
Thorpe, Jeremy


Gurden, Harold
Maydon, Lt.-Cmdr. S. L. C.
Tiley, Arthur (Bradford, W.)


Hall, John (Wycombe)
Meyer, Sir Anthony
Tilney, John (Wavertree)


Hall-Davis, A. G. F.
Mills, Peter (Torrington)
Turton, Rt. Hn. R. H.


Hamilton, Marquess of (Fermanagh)
Mills, Stratton (Belfast, N.)
Tweedsmuir, Lady


Hamilton, M. (Salisbury)
Miscampbell, Norman
van Straubenzee, W. R.


Harris, Frederic (Croydon, N.W.)
Mitchell, David
Vaughan-Morgan, Rt. Hn. Sir John


Harris, Reader (Heston)
Monro, Hector
Vickers, Dame Joan


Harrison, Brian (Maldon)
More, Jasper
Walder, David (High Peak)


Harrison, Col. Sir Harwood (Eye)
Morgan, W. G.
Walker, Peter (Worcester)


Harvey, Sir Arthur Vere (Macclesf'd)
Morrison, Charles (Devizes)
Walker-Smith, Rt. Hn. Sir Derek


Harvey, John (Walthamstow, E.)
Mott-Radclyffe, Sir Charles
Walters, Dennis


Harvie Anderson, Miss
Munro-Lucas-Tooth, Sir Hugh
Ward, Dame Irene


Hastings, Stephen
Murton, Oscar
Weatherill, Bernard


Hawkins, Paul
Neave, Airey
Wells, John (Maidstone)


Hay, John
Nicholls, Sir Harmar
Whitelaw, William


Heald, Rt. Hn. Sir Lionel
Nicholson, Sir Godfrey
Williams, Sir Rolf Dudley (Exeter)


Heath, Rt. Hn. Edward
Noble, Rt. Hn. Michael
Wills, Sir Gerald (Bridgwater)


Hendry, Forbes
Nugent, Rt. Hn. Sir Richard
Wilson, Geoffrey (Truro)


Higgins, Terence L.
Onslow, Cranley
Wise, A. R.


Hiley, Joseph
Orr, Capt. L. P. S.
Wolrige-Cordon, Patrick


Hill, J. E. B. (S. Norfolk)
Orr-Ewing, Sir Ian
Wood, Rt. Hn. Richard


Hirst, Geoffrey
Osborn, John (Hallam)
Woodhouse, Hn. Christopher


Hobson, Rt. Hn. Sir John
Osborne, Sir Cyril (Louth)
Woodnutt, Mark


Hogg, Rt. Hn. Quintin
Page, John (Harrow, W.)
Wylie, N. R.


Hooson, H. E.
Page, R. Graham (Crosby)
Younger, Hn. George


Hopkins, Alan
Pearson, Sir Frank (Clitheroe)



Hordern, Peter
Percival, Ian
TELLERS FOR THE NOES:




Mr. Pym and Mr. R. W. Elliott.

The Deputy-Chairman: As I am of the opinion that the principle of the Clause and any matters arising therefrom have been adequately discussed in the debate

on the Amendments, I shall therefore, under Standing Order No. 47, forthwith put the Question, That the Clause, as amended, stand part of the Bill.
Question put, That the Clause, as amended, stand part of the Bill:—

The Committee divided: Ayes 276, Noes 271.

Division No. 166.]
AYES
[6.39 p.m.


Abse, Leo
Freeson, Reginald
MacPherson, Malcolm


Albu, Austen
Galpern, Sir Myer
Mahon, Peter (Preston, S.)


Allaun, Frank (Salford, E.)
Garrett, W. E.
Mahon, Simon (Bootle)


Alldritt, Walter
Garrow, A.
Mallalieu, E. L. (Brigg)


Allen, Scholefield (Crewe)
Ginsburg, David
Mallalieu,J.P.W.(Huddersfield,E.)


Armstrong, Ernest
Gourlay, Harry
Mapp, Charles


Atkinson, Norman
Greenwood, Rt. Hn. Anthony
Mason, Roy


Bacon, Miss Alice
Gregory, Arnold
Mayhew, Christopher


Bagier, Gordon A. T.
Grey, Charles
Mellish, Robert


Barnett, Joel
Griffiths, David (Rother Valley)
Mendelson, J. J.


Baxter, William
Griffiths, Rt. Hn. James (Llanelly)
Mikardo, Ian


Beaney, Alan
Griffiths, Will (M'chester, Exchange)
Millan, Bruce


Bence, Cyril
Gunter, Rt. Hn. R. J.
Miller, Dr. M. S.


Benn, Rt. Hn. Anthony Wedgwood
Hale, Leslie
Milne, Edward (Blyth)


Bennett, J. (Glasgow, Bridgeton)
Hamilton, James (Bothwell)
Molloy, William


Binns, John
Hamilton, William (West Fife)
Monslow, Walter


Bishop, E. S.
Hamling, William (Woolwich, W.)
Morris, Alfred (Wythenshawe)


Blackburn, F.
Harrison, Walter (Wakefield)
Morris, Charles (Openshaw)


Blenkinsop, Arthur
Hart, Mrs. Judith
Morris, John (Aberavon)


Boardman, H.
Hattersley, Roy
Mulley,Rt.Hn.Frederick(SheffieldPk)


Boston, T. G.
Hazell, Bert
Murray, Albert


Bottomley, Rt. Hn. Arthur
Healey, Rt. Hn. Denis
Neal, Harold


Bowden, Rt. Hn. H. W. (Leics S.W.)
Henderson, Rt. Hn. Arthur
Newens, Stan


Boyden, James
Herbison, Rt. Hn. Margaret
Noel-Baker, Francis (Swindon)


Braddock, Mrs. E. M.
Hill, J. (Midlothian)
Noel-Baker,Rt.Hn.Philip(Derby,S.)


Bradley, Tom
Hobden, Dennis (Brighton, K'town)
Norwood, Christopher


Bray, Dr. Jeremy
Holman, Percy
Oakes, Gordon


Broughton, Dr. A. D. D.
Horner, John
Ogden, Eric


Brown, Hugh D. (Glasgow, Provan)
Houghton, Rt. Hn. Douglas
O'Malley, Brian


Buchanan, Richard
Howarth, Harry (Wellingborough)
Oram, Albert E. (E. Ham, S.)


Butler, Herbert (Hackney, C.)
Howarth, Robert L. (Bolton, E.)
Orbach, Maurice


Butler, Mrs. Joyce (Wood Green)
Howell, Denis (Small Heath)
Orme, Stanley


Carmichael, Neil
Howie, W.
Owen, Will


Carter-Jones, Lewis
Hoy, James
Padley, Walter


Castle, Rt. Hn. Barbara
Hughes, Cledwyn (Anglesey)
Page, Derek (King's Lynn)


Chapman, Donald
Hughes, Emrys (S. Ayrshire)
Paget, R. T.


Coleman, Donald
Hughes, Hector (Aberdeen, N.)
Palmer, Arthur


Conlan, Bernard
Hunter, Adam (Dunfermline)
Pannell, Rt. Hn. Charles


Corbet, Mrs. Freda
Hunter, A. E. (Feltham)
Pargiter, G. A.


Cousins, Rt. Hn. Frank
Hynd, H. (Accrington)
Park, Trevor (Derbyshire, S.E.)


Craddock, George (Bradford, S.)
Irving, Sydney (Dartford)
Parker, John


Crawshaw, Richard
Jackson, Colin
Parkin, B. T.


Cronin, John
Jay, Rt. Hn. Douglas
Pavitt, Laurence


Crosland, Rt. Hn. Anthony
Jeger, George (Goole)
Pearson, Arthur (Pontypridd)


Cullen, Mrs. Alice
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Peart, Rt. Hn. Fred


Dalyell, Tam
Jenkins, Hugh (Putney)
Pentland, Norman


Darling, George
Jenkins, Rt. Hn. Roy (Stechford)
Perry, Ernest G.


Davies, G. Elfed (Rhondda, E.)
Johnson, Carol (Lewisham, S.)
Popplewell, Ernest


Davies, Harold (Leek)
Johnson,James(K'ston-on-Hull,W.)
Prentice, R. E.


Davies, Ifor (Gower)
Jones, Dan (Burnley)
Price, J. T. (Westhoughton)


Delargy, Hugh
Jones.Rt.Hn.Sir Elwyn(W.Ham,S.)
Probert, Arthur


Dell, Edmund
Jones, J. Idwal (Wrexham)
Pursey, Cmdr. Harry


Dempsey, James
Jones, T. w. (Merioneth)
Randall, Harry


Diamond, John
Kelley, Richard
Rankin, John


Dodds, Norman
Kenyon, Clifford
Redhead, Edward


Doig, Peter
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Rees, Merlyn


Donnelly, Desmond
Kerr, Dr. David (W'worth, Central)
Reynolds, G. W.


Driberg, Tom
Lawson, George
Rhodes, Geoffrey


Duffy, Dr. A. E. P.
Leadbitter, Ted
Richard, Ivor


Dunn, James A.
Ledger, Ron
Roberts, Albert (Normanton)


Dunnett, Jack
Lee, Rt. Hn. Frederick (Newton)
Roberts, Goronwy (Caernarvon)


Edwards, Rt. Hn. Ness (Caerphilly)
Lee, Miss Jennie (Cannock)
Robertson, John (Paisley)


English, Michael
Lever, Harold (Cheetham)
Rodgers, William (Stockton)


Ennals, David
Lewis, Arthur (West Ham, N.)
Rogers, George (Kensington, N.)


Ensor, David
Lewis, Ron (Carlisle)
Rose, Paul B.


Evans, Albert (Islington, S.W.)
Lipton, Marcus
Ross, Rt. Hn. William


Evans, Ioan (Birmingham, Yardley)
Lomas, Kenneth
Rowland, Christopher


Fernyhough, E.
Loughlin, Charles
Sheldon, Robert


Finch, Harold (Bedwellty)
Mabon, Dr. J. Dickson
Shinwell, Rt. Hn. E.


Fitch, Alan (Wigan)
McCann, J.
Shore, Peter (Stepney)


Fletcher, Sir Eric (Islington, E.)
MacColl, James
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)


Fletcher, Ted (Darlington)
MacDermot, Niall
Silkin, John (Deptford)


Fletcher, Raymond (Ilkeston)
McGuire, Michael
Silkin, S. C. (Camberwell, Dulwich)


Floud, Bernard
McInnes, James
Silverman, Julius (Aston)


Foley, Maurice
McKay, Mrs. Margaret
Skeffington, Arthur


Foot, Michael (Ebbw Vale)
Mackenzie, Gregor (Rutherglen)
Slater, Joseph (Sedgefield)


Ford, Ben
Mackie, John (Enfield, E.)
Small, William


Fraser, Rt. Hn. Tom (Hamilton)
McLeavy, Frank
Smith, Ellis (Stoke, S.)




Solomons, Henry
Tuck, Raphael
Willey, Rt. Hn. Frederick


Soskice, Rt. Hn. Sir Frank
Urwin, T. W.
Williams, Alan (Swansea, W.)


Stonehouse, John
Varley, Eric G.
Williams, Clifford (Abertillery)


Stones, William
Wainwright, Edwin
Williams, Mrs. Shirley (Hitchin)


Strauss, Rt. Hn. G. R. (Vauxhall)
Walden, Brian (All Saints)
Williams, W. T. (Warrington)


Summerskill, Hn. Dr. Shirley
walker, Harold (Doncaster)
Willis, George (Edinburgh, E.)


Swain, Thomas
Wallace, George
Wilson, Rt. Hn. Harold (Huyton)


Swingler, Stephen
Warbey, William
Wilson, William (Coventry, S.)


Symonds, J. B.
Watkins, Tudor
Winterbottom, R. E.


Taylor, Bernard (Mansfield)
Weitzman, David
Woodburn, Rt. Hn. A.


Thomas, George (Cardiff, W.)
wells, William (Walsall, N.)
Woof, Robert


Thomson, George (Dundee)
White, Mrs. Eirene
Wyatt, Woodrow


Thornton, Ernest
Whitlock, William



Tinn, James
Wigg, Rt. Hn. George
TELLERS FOR THE AYES:


Tornney, Frank
Wilkins, W. A.
Mr. Harper and Mrs. Slater.




NOES


Agnew, Commander Sir Peter
Davies, Dr. Wyndham (Perry Barr)
Howard, Hn. G. R. (St. Ives)


Alison, Michael (Barkston Ash)
d'Avigdor-Goldsmid, Sir Henry
Howe, Geoffrey (Bebington)


Allan, Robert (Paddington, S.)
Dean, Paul
Iremonger, T. L.


Allason, James (Hemel Hempstead)
Deedes, Rt. Hn. W. F.
Irvine, Bryant Godman (Rye)


Anstruther-Gray, Rt. Hn. Sir W.
Digby, Simon Wingfield
Jenkin, Patrick (Woodford)


Astor, John
Doughty, Charles
Jennings, J. C.


Awdry, Daniel
Douglas-Home, Rt. Hn. Sir Alec
Johnston, Russell (Inverness)


Baker, W. H. K.
Drayson, G. B.
Jones, Arthur (Northants, S.)


Balniel, Lord
du Cann, Rt. Hn. Edward
Jopling, Michael


Barber, Rt. Hn. Anthony
Eden, Sir John
Joseph, Rt. Hn. Sir Keith


Barlow, Sir John
Elliot, Capt. Walter (Carshalton)
Kaberry, Sir Donald


Batsford, Brian
Eyre, Reginald
Kerby, Capt. Henry


Bennett, Sir Frederic (Torquay)
Farr, John
Kerr, Sir Hamilton (Cambridge)


Bennett, Dr. Reginald (Gos &amp; Fhm)
Fell, Anthony
Kilfedder, James A.


Berry, Hn. Anthony
Fisher, Nigel
Kimball, Marcus


Bessell, Peter
Fletcher-Cooke, Charles (Darwen)
King, Evelyn (Dorset, S.)


Biffen, John
Fletcher-Cooke, Sir John (S'pton)
Kirk, Peter


Biggs-Davison, John
Foster, Sir John
Lagden, Godfrey


Bingham, R. M.
Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Lambton, Viscount


Birch, Rt. Hn. Nigel
Galbraith, Hn. T. G. D.
Lancaster, Col. C. G.


Black, Sir Cyril
Gammans, Lady
Langford-Holt, Sir John


Blaker, Peter
Gardner, Edward
Lewis, Kenneth (Rutland)


Bossom, Hn. Clive
Gibson-Watt, David
Litchfield, Capt. John


Bowen, Roderic (Cardigan)
Giles, Rear-Admiral Morgan
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)


Box, Donald
Gilmour, Ian (Norfolk, Central)
Lloyd, Ian (P'tsm'th, Langstone)


Boyd-Carpenter, Rt. Hn. J.
Gilmour, Sir John (East Fife)
Longbottom, Charles


Boyle, Rt. Hn. Sir Edward
Glover, Sir Douglas
Longden, Gilbert


Braine, Bernard
Glyn, Sir Richard
Loveys, Walter H.


Brewis, John
Goodhart, Philip
Lubbock, Eric


Brinton, Sir Tatton
Goodhew, Victor
Lucas, Sir Jocelyn


Bromley-Davenport,Lt.-Col.SirWalter
Gower, Raymond
McAdden, sir Stephen


Brooke, Rt. Hn. Henry
Grant, Anthony
MacArthur, Ian


Brown, Sir Edward (Bath)
Grant-Ferris, R.
Mackenzie, Alasdair (Ross&amp;Crom'ty)


Bryan, Paul
Gresham Cooke, R.
Maclean, Sir Fitzroy


Buchanan-Smith, Alick
Grieve, Percy
McMaster, Stanley


Buck, Antony
Griffiths, Eldon (Bury St. Edmunds)
McNair-Wilson, Patrick


Bullus, Sir Eric
Griffiths, Peter (Smethwick)
Maglnnis, John E.


Burden, F. A.
Grimond, Rt. Hn. J.
Maitland, Sir John


Butcher, Sir Herbert
Gurden, Harold
Marples, Rt. Hn. Ernest


Buxton, Ronald
Hall, John (Wycombe)
Marten, Neil


Campbell, Gordon
Hall-Davis, A. G. F.
Maude, Angus


Carlisle, Mark
Hamilton, Marquess of (Fermanagh)
Mawby, Ray


Carr, Rt. Hn. Robert
Hamilton, M. (Salisbury)
Maxwell-Hyslop, R. J.


Cary, Sir Robert
Harris, Frederic (Croydon, N.W.)
Maydon, Lt.-Cmdr. S. L. C.


Chataway, Christopher
Harris, Reader (Heston)
Meyer, Sir Anthony


Chichester-Clark, R.
Harrison, Brian (Maldon)
Mills, Peter (Torrington)


Clark, Henry (Antrim, N.)
Harrison, Col. Sir Harwood (Eye)
Mills, Stratton (Belfast, N.)


Clark, William (Nottingham, S.)
Harvey, Sir Arthur Vere (Macclesf'd)
Miscampbell, Norman


Clarke, Brig. Terence (Portsmth, W.)
Harvey, John (Walthamstow, E.)
Mitchell, David


Cole, Norman
Harvie Anderson, Miss
Monro, Hector


Cooke, Robert
Hastings, Stephen
More, Jasper


Cooper, A. E.
Hawkins, Paul
Morgan, W. G.


Cooper-Key, Sir Neill
Hay, John
Morrison, Charles (Devizes)


Cordle, John
Heald, Rt. Hn, Sir Lionel
Mott-Radclyffe, Sir Charles


Corfield, F. V.
Heath, Rt. Hn. Edward
Monro-Lucas-Tooth, Sir Hugh


Costain, A. P.
Hendry, Forbes
Murton, Oscar


Courtney, Cdr. Anthony
Higgins, Terence L.
Neave, Airey


Craddock, Sir Beresford (Spelthorne)
Hiley, Joseph
Nicholls, Sir Harmar


Crawley, Aidan
Hill, J. E. B. (S. Norfolk)
Nicholson, Sir Godfrey


Crosthwaite-Eyre, Col. Sir Oliver
Hirst, Geoffrey
Noble, Rt. Hn. Michael


Crowder, F. P.
Hobson, Rt. Hn. Sir John
Nugent, Rt. Hn. Sir Richard


Cunningham, Sir Knox
Hogg, Rt. Hn. Quintin
Onslow, Cranley


Curran, Charles
Hooson, H. E.
Orr, Capt. L. P. S.


Currie, G. B. H.
Hopkins, Alan
Orr-Ewing, Sir Ian


Dalkeith, Earl of
Hordern, Peter
Osborne, Sir Cyril (Louth)


Dance, James
Hornby, Richard
Page, John (Harrow, W.)







Page, R. Graham (Crosby)
Shepherd, William
van Straubenzee, W. R.


Pearson, Sir Frank (Clitheroe)
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Vaughan-Morgan, Rt. Hn. Sir John


Percival, Ian
Smyth, Rt. Hn. Brig. Sir John
Vickers, Dame Joan


Peyton, John
Spearman, Sir Alexander
Walder, David (High Peak)


Pickthorn, Rt. Hn. Sir Kenneth
Speir, Sir Rupert
Walker, Peter (Worcester)


Pike, Miss Mervyn
Stainton, Keith
Walker-Smith, Rt. Hn. Sir Derek


Pitt, Dame Edith
Stanley, Hn. Richard
Walters, Dennis


Powell, Rt. Hn. J. Enoch
Stodart, Anthony
Ward, Dame Irene


Price, David (Eastleigh)
Stoddart-Scott, Col. Sir Malcolm
Weatherill, Bernard


Prior, J. M. L.
Studholme, Sir Henry
Wells, John (Maidstone)


Pym, Francis
Talbot, John E.
Whitelaw, William


Quennell, Miss J. M.
Taylor, Sir Charles (Eastbourne)
Williams, Sir Rolf Dudley (Exeter)


Ramsden, Rt. Hn. James
Taylor, Edward M. (G'gow,Cathcart)
Wills, Sir Gerald (Bridgwater)


Redmayne, Rt. Hn. Sir Martin
Taylor, Frank (Moss Side)
Wilson, Geoffrey (Truro)


Rees-Davies, W. R.
Teeling, Sir William
Wise, A. R.


Renton, Rt. Hn. Sir David
Temple, John M.
Wolrige-Gordon, Patrick


Ridsdale, Julian
Thatcher, Mrs. Margaret
Wood, Rt. Hn. Richard


Roberts, Sir Peter (Heeley)
Thomas, Sir Leslie (Canterbury)
Woodhouse, Hn. Christopher


Robson Brown, Sir William
Thomas, Rt. Hn. Peter (Conway)
Woodnutt, Mark


Rodgers, Sir John (Sevenoaks)
Thompson, Sir Richard (Croydon,S.)
Wylie, N. R.


Roots, William
Thorneycroft, Rt. Hn. Peter
Younger, Hn. George


Royle, Anthony
Thorpe, Jeremy



Russell, Sir Ronald
Tiley, Arthur (Bradford, W.)
TELLERS FOR THE NOES:


St. John-stevas, Norman
Tilney, John (Wavertree)
Mr. McLaren and


Scott-Hopkins, James
Turton, Rt. Hn. R. H.
Mr. R. W. Elliott.


Sharpies, Richard
Tweedsmuir, Lady

Clause 43.—(TAXATION OF COMPANY DISTRIBUTIONS.)

Mr. Diamond: I beg to move Amendment No. 616, in page 51, line 16, at the end, to insert:
Provided that in the case of preference dividends the tax chargeable and the amount of income represented by the dividends shall be determined by reference to the fixed gross rate of dividend.
This is a slightly technical matter but I think that I can deal with it shortly and satisfy the Committee by saying that its purpose is to preserve the law as it now stands. Under the present law where a company is paying a preference dividend and there is a change in the rate of tax subsequent to the payment of that dividend, then, in as much as it is a contractual amount, that gross amount is not deemed to be altered. Whereas in the case of ordinary dividends the way of arriving at the gross amount is to take account of the cash actually received—that is, the net figure—and to gross it up and say, therefore, that the resulting answer is the gross figure. But for preference dividends this would cause injustice, because the gross amount of the preference dividend is the subject of the contract between the company and the preference shareholder. One must, therefore, maintain that position, and the Amendment is designed to bring the existing law and practice into the proposed new law.

Amendment agreed to.

Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Barber: This Clause, as the side note indicates, is concerned with the taxation treatment of distributions. The system which is chosen is basic to the form of Corporation Tax which has been selected by the Chancellor. The reasons why we object to this system were deployed at great length by my hon. Friends and I yesterday in the full debate we had on the first Amendment concerning Corporation Tax. I do not think that there is anything more that I need add to the objections which were expressed yesterday. This is such a basic part of the Corporation Tax that I hope that, in the circumstances, my hon. Friends will express their feelings by voting against the Clause.

Mr. Stratton Mills: There is some uncertainty about the tax position of bonus shares issued by public companies. Three companies have already postponed bonus share issues following the announcement. Would the Chief Secretary clear up the position?

Mr. Diamond: Bonus debentures will count as a distribution. Bonus redeemable preference shares will count as a distribution. Simple bonus shares will not, in the ordinary case, count as a distribution, but there might be such movements in share capital associated with the bonus shares as to make it something different from a plain issue of bonus shares, which is a simple reallocation of the ownership of a company between shareholders, and affects paper, nothing else. If there were something different from that—for example, if the


bonus issue had been preceded by a repayment of capital or was followed by a repayment of capital—to show that the bonus capital issue was associated with other transactions, in that case not tha amount of the bonus share but the effect on the capital would be taken into account. So that if, in effect, the capital had been reduced and part of it had been paid back to shareholders, that would count as a distribution. The matter will

be discussed in detail on the Schedule. While I do not claim that it is a straightforward matter, I hope that I have explained the principle to the satisfaction of the hon. Member for Belfast, North (Mr. Stratton Mills).

Question put, That the Clause, as amended, stand part of the Bill:—

The Committee divided: Ayes 275, Noes 273.

Division No. 167.]
AYES
[6.55 p.m.


Abse, Leo
Fernyhough, E.
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Albu, Austen
Finch, Harold (Bedwellty)
Kerr, Dr. David (W'worth, Central)


Allaun, Frank (Salford, E.)
Fitch, Alan (Wigan)
Lawson, George


Alldritt, Walter
Fletcher, Sir Eric (Islington, E.)
Leadbitter, Ted


Allen, Scholefield (Crewe)
Fletcher, Ted (Darlington)
Ledger, Ron


Armstrong, Ernest
Fletcher, Raymond (Ilkeston)
Lee, Rt. Hn. Frederick (Newton)


Atkinson, Norman
Floud, Bernard
Lee, Miss Jennie (Cannock)


Bacon, Miss Alice
Foley, Maurice
Lever, Harold (Cheetham)


Bagier, Gordon A. T.
Foot, Michael (Ebbw Vale)
Lewis, Arthur (West Ham, N.)


Barnett, Joel
Ford, Ben
Lewis, Ron (Carlisle)


Baxter, William
Fraser, Rt. Hn. Tom (Hamilton)
Lipton, Marcus


Beaney, Alan
Freeson, Reginald
Lomas, Kenneth


Bence, Cyril
Galpern, Sir Myer
Loughlin, Charles


Benn, Rt. Hn. Anthony Wedgwood
Garrett, W. E.
Mabon, Dr. J. Dickson


Bennett, J. (Glasgow, Bridgeton)
Garrow, A.
MacColl, James


Binns, John
Ginsburg, David
MacDermot, Niall


Bishop, E. s.
Greenwood, Rt. Hn. Anthony
McGuire, Michael


Blackburn, F.
Gregory, Arnold
Mclnnes, James


Blenkinsop, Arthur
Grey, Charles
McKay, Mrs. Margaret


Boardman, H.
Griffiths, David (Rother Vailey)
Mackenzie, Gregor (Rutherglen)


Boston, T. G.
Griffiths, Rt. Hn. James (Llanelly)
Mackie, John (Enfield, E.)


Bottomley, Rt. Hn. Arthur
Griffiths, Will (M'chester, Exchange)
McLeavy, Frank


Bowden, Rt. Hn. H. W. (Leics S.W.)
Gunter, Rt. Hn. R. J.
MacPherson, Malcolm


Boyden, James
Hale, Leslie
Mahon, Peter (Preston, S.)


Braddock, Mrs. E. M.
Hamilton, James (Bothwell)
Mahon, Simon (Bootle)


Bradley, Tom
Hamilton, William (West Fife)
Mallalieu, E. L. (Brigg)


Bray, Dr. Jeremy
Hamling, William (Woolwich, W.)
Mallalieu,J.P.W.(Hudderstield,E.)


Broughton, Dr. A. D. D.
Harper, Joseph
Mapp, Charles


Brown, Hugh D. (Glasgow, Provan)
Harrison, Walter (Wakefield)
Mason, Roy


Buchanan, Richard
Hart, Mrs. Judith
Mayhew, Christopher


Butler, Herbert (Hackney, C.)
Hattersley, Roy
Mellish, Robert


Butler, Mrs. Joyce (Wood Green)
Hazell, Bert
Mendelson, J. J.


Carmichael, Neil
Healey, Rt. Hn. Denis
Mikardo, Ian


Carter-Jones, Lewis
Henderson, Rt. Hn. Arthur
Millan, Bruce


Castle, Rt. Hn. Barbara
Herblson, Rt. Hn. Margaret
Miller, Dr. M. S.


Chapman, Donald
Hill, J. (Midlothian)
Milne, Edward (Blyth)


Coleman, Donald
Hobden, Dennis (Brighton, K'town)
Molloy, William


Conlan, Bernard
Holman, Percy
Monslow, Walter


Corbet, Mrs. Freda
Horner, John
Morris, Alfred (Wythenshawe)


Craddock, George (Bradford, S.)
Houghton, Rt. Hn. Douglas
Morris, Charles (Openshaw)


Crawshaw, Richard
Howarth, Harry (Wellingborough)
Morris, John (Aberavon)


Cronin, John
Howarth, Robert L. (Bolton, E.)
Mulley,Rt.Hn.Frederick(SheffieldPk)


Crosland, Rt. Hn. Anthony
Howell, Denis (Small Heath)
Murray, Albert


Cullen, Mrs. Alice
Howie, W.
Neal, Harold


Dalyell, Tam
Hoy, James
Newens, Stan


Darling, George
Hughes, Cledwyn (Anglesey)
Noel-Baker, Francis (Swindon)


Davies, G. Elfed (Rhondda, E.)
Hughes, Emrys (S. Ayrshire)
Noel-Baker, Rt.Hn.Phillp(Derby,S.)


Davies, Harold (Leek)
Hughes, Hector (Aberdeen, N.)
Norwood, Christopher


Davies, Ifor (Gower)
Hunter, Adam (Dunfermline)
Oakes, Gordon


Delargy, Hugh
Hunter, A. E. (Feltham)
Ogden, Eric


Dell, Edmund
Hynd, H. (Accrington)
O'Malley, Brian


Dempsey, James
Irving, Sydney (Dartford)
Oram, Albert E. (E. Ham, S.)


Diamond, John
Jackson, Colin
Orbach, Maurice


Dodds, Norman
Jay, Rt. Hn. Douglas
Orme, Stanley


Doig, Peter
Jeger, George (Gool[...]e)
Owen, Will


Donnelly, Desmond
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Padley, Walter


Driberg, Tom
Jenkins, Hugh (Putney)
Page, Derek (King's Lynn)


Duffy, Dr. A. E. P.
Jenkins, Rt. Hn. Roy (Stechford)
Paget, R. T.


Dunn, James A.
Johnson, Carol (Lewisham, S.)
Palmer, Arthur


Dunnett, Jack
Johnson,James(K'ston-on-Hull,W.)
Pannell, Rt. Hn. Charles


Edwards, Rt. Hn. Ness (Caerphilly)
Jones, Dan (Burnley)
Pargiter, G. A.


English, Michael
Jones,Rt.Hrt.Sir Elwyn(W.Ham,S.)
Park, Trevor (Derbyshire, S.E.)


Ennals, David
Jones, J. Idwal (Wrexham)
Parker, John


Ensor, David
Jones, T. W. (Merioneth)
Parkin, B. T.


Evans, Albert (Islington, S.W.)
Kelley, Richard
Pavitt, Laurence


Evans, Ioan (Birmingham, Yardley)
Kenyon, Clifford
Pearson, Arthur (Pontypridd)




Peart, Rt. Hn. Fred
Silkin, John (Deptford)
Wainwright, Edwin


Pentland, Norman
Silkin, S. C. (Camberwell, Dulwich)
Walden, Brian (All Saints)


Perry, Ernest G.
Silverman, Julius (Alton)
Walker, Harold (Doncaster)


Popplewcll, Ernest
Skeffington, Arthur
Wallace, George


Prentice, R. E.
Slater, Mrs. Harriet (Stoke, N.)
Warbey, William


Price, J. T. (Westhoughton)
Slater, Joseph (Sedgefield)
Watkins, Tudor


Probert, Arthur
Small, William
Weitzman, David


Pursey, Cmdr. Harry
Smith, Ellit (Stoke, S.)
Wells, William (Walsall, N.)


Randall, Harry
Solomons, Henry
White, Mrs. Eirene


Rankin, John
Soskice, Rt. Hn. Sir Frank
Whitlock, William


Redhead, Edward
Stonehouse, John
Wigg, Rt. Hn. George


Rees, Merlyn
Stones, William
Wilkins, W. A.


Reynolds, G. W.
Strauss, Rt. Hn. G. R. (Vauxhall)
Willey, Rt. Hn. Frederick


Rhodes, Geoffrey
Summerskill, Hn. Dr. Shirley
Williams, Alan (Swansea, W.)


Richard, Ivor
Swain, Thomas
Williams, Clifford (Abertillery)


Roberts, Albert (Normanton)
Swingler, Stephen
Williams, Mrs. Shirley (Hitchin)


Roberts, Goronwy (Caernarvon)
Symonds, J. B.
Williams, W. T. (Warrington)


Robertson, John (Paisley)
Taylor, Bernard (Mansfield)
Willis, George (Edinburgh, E.)


Rodgers, William (Stockton)
Thomas, George (Cardiff, W.)
Wilson, William (Coventry, S.)


Rogers, George (Kensington, N.)
Thomas, Iorwerth (Rhondda, W.)
Winterbottom, R. E.


Rose, Paul B.
Thomson, George (Dundee, E.)
Woodburn, Rt. Hn. A.


Ross, Rt. Hn. William
Thornton, Ernest
Woof, Robert


Rowland, Christopher
Tinn, James
Wyatt, Woodrow


Sheldon, Robert
Tomney, Frank



Shinwell, Rt. Hn. E.
Tuck, Raphael
TELLERS FOR THE AYES:


Shore, Peter (Stepney)
Urwin, T. W.
Mr. McCann and Mr. Gourlay.


Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Varley, Eric G.





NOES


Agnew, Commander Sir Peter
Corfield, F. V.
Hamilton, M. (Salisbury)


Alison, Michael (Barkston Ash)
Costain, A. P.
Harris, Frederic (Croydon, N.W.)


Allan, Robert (Paddington, S.)
Courtney, Cdr. Anthony
Harris, Reader (Heston)


Allason, James (Hemel Hempstead)
Craddock, Sir Beresford (Spelthorne)
Harrison, Brian (Maldon)


Anstruther-Cray, Rt. Hn. Sir W.
Crawley, Aidan
Harrison, Col. Sir Harwood (Eye)


Astor, John
Crosthwaite-Eyre, Col. Sir Oliver
Harvey, Sir Arthur Vere (Macclesf'd)


Awdry, Daniel
Crowder, F. P.
Harvey, John (Walthamstow, E.)


Baker, W. H. K.
Cunningham, Sir Knox
Harvie Anderson, Miss


Balniel, Lord
Curran, Charles
Hastings, Stephen


Barber, Rt. Hn. Anthony
Currie, G. B. H.
Hawkins, Paul


Barlow, Sir John
Dalkeith, Earl of
Hay, John


Batsford, Brian
Dance, James
Heald, Rt. Hn. Sir Lionel


Bennett, Sir Frederic (Torquay)
Davies, Dr. Wyndham (Perry Barr)
Heath, Rt. Hn. Edward


Bennett, Dr. Reginald (Gos &amp; Fhm)
d'Avigdor-Goldsmid, Sir Henry
Hendry, Forbes


Berry, Hn. Anthony
Dean, Paul
Higgins, Terence L


Bessell, Peter
Deedes, Rt. Hn. W. F.
Hiley, Joseph


Biffen, John
Digby, Simon Wingfield
Hill, J. E. B. (S. Norfolk)


Biggs-Davison, John
Doughty, Charles
Hirst, Geoffrey


Bingham, R. M.
Douglas-Home, Rt. Hn. Sir Alec
Hobson, Rt. Hn. Sir John


Birch, Rt. Hn. Nigel
Drayson, G. B.
Hogg, Rt. Hn. Quintin


Black, Sir Cyril
du Cann, Rt. Hn. Edward
Hooson, H. E.


Blaker, Peter
Eden, Sir John
Hopkins, Alan


Bossom, Hn. Clive
Elliot, Capt. Walter (Carshalton)
Hordern, Peter


Bowen, Roderic (Cardigan)
Eyre, Reginald
Hornby, Richard


Box, Donald
Farr, John
Howard, Hn. G. R. (St. Ives)


Boyd-Carpenter, Rt. Hn. J.
Fell, Anthony
Howe, Geoffrey (Bebington)


Boyle, Rt. Hn. Sir Edward
Fisher, Nigel
Hunt, John (Bromley)


Braine, Bernard
Fletcher-Cooke, Charles (Darwen)
Iremonger, T. L.


Brewis, John
Fletcher-Cooke, Sir John (S'pton)
Irvine, Bryant Godman (Rye)


Brinton, Sir Tatton
Foster, Sir John
Jenkin, Patrick (Woodford)


Bromley-Davenport,Lt.-Col.SirWalter
Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Jennings, J. C.


Brooke, Rt. Hn. Henry
Galbraith, Hn. T. G. D.
Johnson Smith, C. (East Grinstead)


Brown, Sir Edward (Bath)
Gammans, Lady
Johnston, Russell (Inverness)


Bryan, Paul
Gardner, Edward
Jones, Arthur (Northants, S.)


Buchanan-Smith, Alick
Gibson-Watt, David
Jopling, Michael


Buck, Antony
Giles, Rear-Admiral Morgan
Joseph, Rt. Hn. Sir Keith


Bullus, Sir Eric
Gilmour, Ian (Norfolk, Central)
Kaberry, Sir Donald


Burden, F. A.
Gilmour, Sir John (East Fife)
Kerby, Capt. Henry


Butcher, Sir Herbert
Glover, Sir Douglas
Kerr, Sir Hamilton (Cambridge)


Buxton, Ronald
Glyn, Sir Richard
Kilfedder, James A.


Campbell, Gordon
Goodhart, Philip
Kimball, Marcus


Carlisle, Mark
Goodhew, Victor
King, Evelyn (Dorset, S.)


Carr, Rt. Hn. Robert
Gower, Raymond
Kirk, Peter


Cary, Sir Robert
Grant, Anthony
Lagden, Godfrey


Chataway, Christopher
Grant-Ferris, R.
Lambton, Viscount


Chichester-Clark, R.
Gresham Cooke, R.
Lancaster, Col. C. G.


Clark, Henry (Antrim, N.)
Grieve, Percy
Langford-Holt, Sir John


Clark, William (Nottingham, S.)
Griffiths, Eldon (Bury St. Edmunds)
Lewis, Kenneth (Rutland)


Clarke, Brig. Terence (Portsmth, W.)
Griffiths, Peter (Smethwick)
Litchfield, Capt. John


Cole, Norman
Grimond, Rt. Hn. J.
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)


Cooke, Robert
Gurden, Harold
Lloyd, Ian (P'tsm'th, Langstone)


Cooper, A. E.
Hall, John (Wycombe)
Longbottom, Charles


Cooper-Key, Sir Neill
Hall-Davis, A. G. F.
Longden, Gilbert


Cordle, John
Hamilton, Marquess of (Fermanagh)
Loveys, Walter H.







Lubbock, Eric
Page, John (Harrow, W.)
Taylor, Sir Charies (Eastbourne)


Lucas, Sir Jocelyn
Page, R. Graham (Crosby)
Taylor, Edward M. (G'gow.Cathcart)


McAdden, Sir Stephen
Pearson, Sir Frank (Clitheroe)
Taylor, Frank (Moss Side)


MacArthur, Ian
Percival, Ian
Teeling, Sir William


Mackenzie, Alasdair (Ross&amp;Crom'ty)
Peyton, John
Temple, John M.


McLaren, Martin
Pickthorn, Rl. Hn. Sir Kenneth
Thatcher, Mrs. Margaret


Maclean, Sir Fitzroy
Pike, Miss Mervyn
Thomas, Sir Leslie (Canterbury)


McMaster, Stanley
Pitt, Dame Edith
Thomas, Rt. Hn. Peter (Conway)


McNair-Wilson, Patrick
Powell, Rt. Hn. J. Enoch
Thompson, Sir Richard (Croydon,S.)


Maginnis, John E.
Price, David (Eastleigh)
Thorneycroft, Rt. Hn. Peter


Maitland, Sir John
Prior, J. M. L.
Tiley, Arthur (Bradford, W.)


Marples, Rt. Hn. Ernest
Pym, Francis
Tilney, John (Wavertree)


Marten, Neil
Quennell, Miss J. M.
Turton, Rt. Hn. R. H.


Maude, Angus
Ramsden, Rt. Hn. James
Tweedsmuir, Lady


Mawby, Ray
Redmayne, Rt. Hn. Sir Martin
van Straubenzee, W. R.


Maxwell-Hyslop, R. J.
Rees-Davies, W. R.
Vaughan-Morgan, Rt. Hn. Sir John


Maydon, Lt.-Cmdr. S. L. C.
Renton, Rt. Hn. Sir David
Vickers, Dame Joan


Meyer, Sir Anthony
Ridsdale, Julian
Walder, David (High Peak)


Mills, Peter (Torrington)
Roberts, Sir Peter (Heeley)
Walker, Peter (Worcester)


Mills, Stratton (Belfast, N.)
Robson Brown, Sir William
Walker-Smith, Rt. Hn. Sir Derek


MisCampbell, Norman
Rodgers, Sir John (Sevenoaks)
Walters, Dennis


Mitchell, David
Roots, William
Ward, Dame Irene


Monro, Hector
Royle, Anthony
Weatherill, Bernard


Morgan, W. G.
Russell, Sir Ronald
Wells, John (Maidstone)


Morrison, Charles (Devizes)
St. John-Stevas, Norman
Whitelaw, William


Mott-Radclyffe, Sir Charles
Scott-Hopkins, James
Williams, Sir Rolf Dudley (Exeter)


Munro-Lucas-Tooth, Sir Hugh
Sharples, Richard
Wills, Sir Gerald (Bridgwater)


Murton, Oscar
Shepherd, William
Wilson, Geoffrey (Truro)


Neave, Airey
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Wise, A. R.


Nicholls, Sir Harmar
Smyth, Rt. Hn. Brig. Sir John
Wolrige-Gordon, Patrick


Nicholson, Sir Godfrey
Spearman, Sir Alexander
Wood, Rt. Hn. Richard


Noble, Rt. Hn. Michael
Speir, Sir Rupert
Woodhouse, Hon. Christopher


Nugent, Rt. Hn. Sir Richard
Stainton, Keith
Woodnutt, Mark


Onslow, Cra[...]ley
Stanley, Hn. Richard
Wylie, N. R.


Orr, Capt. L. P. S.
Stodart, Anthony
Younger, Hn. George


Orr-Ewing, Sir Ian
Stoddart-Scott, Col. Sir Malcolm



Osborn, John (Hallam)
Studholme, Sir Henry
TELLERS FOR THE NOES:


Osborne, Sir Cyril (Louth)
Talbot, John E.
Mr. S. W. Elliott and Mr. More.

Clause 44.—(TAX ON DISTRIBUTIONS ETC. RECEIVED BY UNITED KINGDOM COMPANY.)

Mr. Patrick Jenkin: I beg to move Amendment No. 480, in page 52, line 36, to leave out "so resident".
The result of that Division, Sir Samuel, makes it perfectly clear that the process of attrition has begun, and will continue. I have no doubt that the Patronage Secretary has been searching the Crypt, and that the next Division will produce the results of his endeavours.
Clause 44 is the first of the Clauses which are made necessary by and are consequential upon the major change in the whole basis of taxing companies. It deals with the treatment of inter-company dividends. The beauty of the existing system of inter-company dividends can be summed up briefly in the phrase, "once net, always net". Once a company had declared and distributed a dividend and deducted tax from it, in the hands of an inter-company receiving it that dividend was taxed, did not suffer further tax, and could itself form the subject matter of gross dividend and be passed on down the line. That system,

to use the Chief Secretary's phrase—with which we on this side are becoming a little tired—was, indeed, simplicity itself.
The change in the basis, which Corporation Tax brings about, makes necessary a very great number of complications to make the new system work. It upsets the straightforward system of inter-company dividends that I have just described, and introduces all sorts of complications that are necessary to avoid the double taxation of dividends against which, in most circumstances, even the present Government seem to have set their face. It requires all sorts of exceptions and exclusions in order to avoid what would be manifest injustices.
The first provision is that there should be credit for the dividend tax suffered by the company against the dividend tax due. The point is that a period of time can elapse—it might be months and months—between the declaration of dividend by a subsidiary company and payment of tax to the revenue, and the time when the parent company declares its own dividend and is allowed as it were, to take credit for the tax deducted and paid over. This is tantamount to an interest-free loan to the revenue. There are, therefore, provisions in the Clause to allow


payment of gross in two circumstances—the first, where there is a payment between a parent company and a subsidiary company, and the second, where there is what has been called a consortium company. The conditions are spelt out in subsection (3). It is a welcome innovation to recognise the consortium company as being a body requiring special taxation treatment.
Clearly payment of dividends gross without deduction of tax to an overseas company is inappropriate. Therefore, both payer and payee must remain United Kingdom residents; in other words, both parent and subsidiary must be United Kingdom residents. In the case of a consortium, while the payment of dividends where payment gross is allowed must be made between two United Kingdom companies, it does not necessarily follow that the pre-conditions which must exist to give rise to an election to pay dividends gross mean that all the "parents" of the consortium company should themselves be United Kingdom residents. Why should they all have to be United Kingdom residents? Take the example of the consortium company, of which there are many such in this country, which is owned partly by United Kingdom companies and partly by overseas companies. Why should the dividends which will pass between the United Kingdom consortium company to its United Kingdom parents have to be paid net under deduction of tax merely because part of the partnership arrangement is owned abroad?
The purpose of the Amendment is to alter the situation as it is contained in the Bill and treat a consortium as coming within the terms of the Bill, and therefore open to the election procedure, so far as it affects the consortium company and its United Kingdom parents but leave entirely untouched the situation as between the consortium company and its overseas parents. Dividends in the latter case would continue to have to be paid net under deduction of tax and the tax turned over to the Revenue.
The Amendment would remove the words "so resident" from line 36 and have the effect of removing the restriction that all the parent companies should be United Kingdom residents. A consortium would come within the terms

of the subsection and be entitled to make an election, even if one or more of its parents were overseas companies.
I repeat and emphasise one matter, because I do not want to be misunderstood. Dividends passing between the consortium company and the overseas parents would have to continue to be paid net because of the introductory two lines of subsection (3):
Where a company receives dividends from another company (both being resident in the United Kingdom)".
The Amendment would be entirely within the spirit of the whole subsection as drafted and would remove what could well be regarded as an unnecessary and harsh anomaly.
Partnership companies are an admirable arrangement. There are many of them, where U.K. interests which perhaps have manufacturing resources wish to make use of foreign technical "know-how" and where the foreign company concerned wants a stake in the equity. Therefore, a joint company is set up to exploit the foreign company's "know-how" in the U.K. company's manufacturing resources, to the benefit of all concerned. I have in the past been, though I am not now, the secretary of two such companies, both owner 50–50—half by a U.K. company and half in one case by an American company and in the other case by a Canadian company. If the 50–50 company had been 51–49, 51 per cent. being owned by the U.K. company, it would count as a subsidiary and would be able to declare its dividend to its parent gross. If the other parent had been a U.K. parent, it would then have been a consortium and all the dividends could have been paid gross. Because it was 50–50, under the Bill as it stands all dividends, including the dividends to the U.K. parent, would have to be paid net. This is an unjustifiable discrimination against such companies. Such joint ventures, which have brought this country considerable advantage in the last few years, would be struck at by the Clause if it were not amended.
This is a reasonable Amendment which I hope that the Government will be able to accept. It is entirely within the spirit of the Clause as drafted. It would impose no possibility of tax avoidance on the part of any of the companies concerned.

7.15 p.m.

Mr. John Peyton: I support the Amendment which has been moved so skilfully by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin). Only yesterday we heard once again from the Chancellor of the Exchequer, as we have heard from his predecessors, a very warm and vigorous statement that the one thing which conditioned this country's future fate was the balance of payments. In the light of that statement, it is curious that some of the organisations which contribute most to a healthy balance of payments should be the special victims of the Bill. I would not seek to suggest that it is done out of malice. I suggest that it is done with a certain lack of understanding in what is an immensely complicated field.
I very much hope that the Treasury Ministers will, between now and Report, think very hard indeed about the consequences of the present provisions of the Corporation Tax for the two British oil companies—Shell and B.P. I ask the Government especially to remember the immense contributions which both companies make to our balance of payments. Shell, in particular, will suffer very heavily from the provisions of this Part of the Bill. If I may say this without incurring your displeasure, Sir Samuel, although the new Amendments tabled by the Chancellor will be of considerable use to B.P. they will do very little to help Shell.
Shell Petroleum is to all intents and purposes a subsidiary of Shell Transport and Trading. Yet, because of a foreign association which I do not think anyone would deny is useful and valuable to this country, the company is denied the facilities given under the Bill in ordinary subsidiary relationships. I think I detected the Minister without Portfolio shaking his head. I am assured that this is the effect at the moment and I hope that the Government will be slow to reject the Amendment even if, as I imagine, the hon. Gentleman thinks that I am wrong in attributing this effect to the Bill.
I support what my hon. Friend said. I very much hope that in this instance, as in others, the Government will look very seriously at it. It is not a matter where political or party prejudice is appropriate. This is a matter of immense importance to this country's future and to

the prosperity of an immensely important industry. I hope that the Government will either accept the Amendment now or say that they will table an acceptable Amendment themselves on Report.

Sir Eric Fletcher: I thought that the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) put the case for the Amendment very moderately and capably, and I agree with the hon. Member for Yeovil (Mr. Peyton) when he remarks that we do not want to consider this question in any party spirit.
Some of the adjectives which hon. Members opposite use are quite unjustified. There is no question of making any proposal in this part of the Bill out of malice or with the intention of injuring anybody. It is important to put this matter in its right perspective. It is wrong for hon. Members to talk about the subsection as though it were calculated to penalise anyone. On the contrary, as the hon. Member for Wanstead and Woodford recognised, I think, the introduction of these provisions about consortia are an innovation, a concession, and something which benefits companies as regards franking of a kind which has not previously been part of our fiscal system.
Quite properly, as we are coming to a new aspect of the Bill, the hon. Member for Wanstead and Woodford, by way of preamble, gave us some of the background of Clause 44 before coming to the point of his Amendment. To appreciate the significance of the Amendment, the Committee must appreciate what is done by the Clause. As between parent and wholly owned subsidiary, there is no question of Corporation Tax. They can be grouped. As between parent and subsidiary, provided that they are both residents, they have the benefit of election with regard to Income Tax.

Mr. John M. Temple: I am sure that the Minister does not wish to mislead the Committee. A moment ago he referred to grouping. Surely, he meant grouping for dividends only in this respect?

Sir Eric Fletcher: My point was this. In the relationship of parent and subsidiary, Corporation Tax is payable by one or the other. In the case of a parent and subsidiary, Income Tax can be payable by either one or the other, according to


whether or not election takes place under subsection (3). That right of election, in other words, the right of a parent to collect a dividend gross from its subsidiary, or vice versa, is a concession granted to United Kingdom resident companies. Then, in subsection (3) it is extended to the case of a subsidiary not of one single parent but of a consortium. If all the members of the consortium, that is, all the parents, are United Kingdom companies, there would be no question but that it was appropriate that they should have the right of election and should be able to receive the dividend paid by the subsidiary gross.
We have gone further than that. By paragraph (b) we have provided that if three-quarters or more of the ordinary share capital of the subsidiary company is owned betwen them by five or fewer companies resident in the United Kingdom, then, provided the company receiving the dividend is one of the five and none of them owns less than one-tenth of the capital, it also can have the benefit of the consortium arrangement which would be available if all the parents were United Kingdom companies, and, if that company makes an election, it also can have the dividend paid gross by its subsidiary.
Hon. Members want us to go further. As I understood him, the hon. Member for Wanstead and Woodford wants us to provide that, in the case of any consortium in which there is one resident United Kingdom company, the subsidiary shall be able to pay the dividend gross to the United Kingdom parent but be under an obligation to pay the dividend net to the non-resident parent. I think that I have understood the argument.
The reason we do not feel able to accept the Amendment is this. One has to draw the line somewhere. In the case of a consortium in which, say, 90 per cent. of the share capital was owned by non-U.K. resident Companies and in which 10 per cent. of the share capital of the subsidiary was owned by a United Kingdom resident, it would obviously be inappropriate to regard that as a United Kingdom consortium. If, on the other hand, 75 per cent.—admittedly, it is an arbitrary figure—of the capital of the subsidiary is owned by a United Kingdom company, then we think it reasonable

that the benefits of this consortium provision should be extended and they should have the same benefit as though the subsidiary were an entirely owned subsidiary of the United Kingdom company.
There has been reference to the special case of British Petroleum and Shell. I do not think that it would be appropriate at this moment to discuss the special position of those two companies, although we may have an opportunity of doing so later. In conclusion, I point out that, as the hon. Member for Wanstead and Woodford recognised, it cannot really be said that this provision, which is by nature a concession as compared with the present rule, imposes any hardship on those companies which cannot bring themselves within the definition in paragraph (b). They do not suffer any permanent diminution of revenue.
As the hon. Gentleman recognised, it is merely a question of timing. But we feel that once we make any greater inroads on the general principle that dividends should be paid under deduction of Income Tax from one company to another, it will be very difficult to know where to draw the line, and we think that this is a very fair and reasonable compromise in all the circumstances.

Mr. Barber: Is the hon. Gentleman's objection to this proposal, which has obvious advantages for certain consortia, primarily that it would be difficult to administer, or is it that he thinks that it might give rise to some tax avoidance?

Sir Eric Fletcher: I do not myself think that there is any question of tax avoidance here at all.

Mr. Peyton: The hon. Gentleman's only argument so far is that he has got to draw the line somewhere. Let us look at that argument, as seen from these benches. What possible justification can there be for denying an advantage to two companies, which are to all intents and purposes in the relationship of parent and subsidiary, for one reason only, that is, that they are in some association, normally a beneficial association, with a foreign concern? It seems narrow-minded in the extreme.

Sir Eric Fletcher: It is not narrow-minded. There is not the same parental


relationship of a wholly owned subsidiary and its parent when the capital of the subsidiary is owned by four or five companies.

Mr. William Clark: Will the Minister give us a direct answer to this question? If the Amendment were accepted, would there be any loss of tax at all? My understanding of it is that there would be no loss of tax to the Revenue. If I may say so, the hon. Gentleman's argument is very weak, particularly in view of what was said by my hon. Friend the Member for Yeovil (Mr. Peyton) about Shell and other oil companies. If there is no loss of tax, why resist the Amendment?

Sir Eric Fletcher: I think that it is obvious that there is no ultimate loss of tax to the Revenue and no ultimate gain of tax to the taxpayer in either event. It is merely a question of timing.

Mr. William Clark: Then do I take it that the Minister is saying that the Amendment is unnecessary and that all the fears entertained by my hon. Friends can be set at rest? He said that it would not be right to look at the question of the oil companies, Shell in particular, presumably. May we take it that we have an assurance from the Government that they intend to look at the position of Shell and to remedy any anomaly which may be thrown up?

Sir Eric Fletcher: I thought that it would be much better to deal with the case of Shell and B.P. when we came to overseas corporations generally, because that is a much bigger subject.

7.30 p.m.

Mr. Barber: I listened with interest to what was said by my hon. Friends the Members for Wanstead and Woodford (Mr. Patrick Jenkin) and for Yeovil (Mr. Peyton), and I agree with the Minister that they put the case extremely clearly. I am very disappointed with the reply which they have received.

Having listened to the discussion, it seems to me, (a) that there is no question of tax avoidance; (b) that there is no question of any loss of taxation quite inadvertently; and (c) that it must be accepted from what my hon. Friends have said that an arrangement of the kind they have proposed would be of advantage to the consortia concerned. If these three conclusions be right, as I think they are, the only serious argument against the Amendment would be on the ground that, in some way or another, it was administratively impossible or nearly impossible. But we have heard no such argument.
The position is most unsatisfactory. If there be arguments against our proposal, we have not heard them stated. In the circumstances, although this may be a matter affecting only a few companies, it is important, and, having received such an unsatisfactory reply, I can only hope that my hon. Friends will divide the Committee.

Question put, That "so resident" stand part of the Clause:—

The Committee proceeded to a Division—

Mr. Frank Allaun: (seated and covered): I wish to raise a point of order, Sir Samuel. Because of the crush at the entrance to the Division Lobby, I think that several hon. Members, certainly myself, were unable to get into the Lobby before the doors were closed. I wish to make no suggestion of any deliberate blocking of the entry. It was entirely fortuitous. Nevertheless, it did prevent certain hon. Members, and certainly myself, from registering our vote, although we were here in time.

The Deputy-Chairman (Sir Samuel Storey): I observed no undue crush at the doors. Hon. Members had six minutes to get here, and they should be here in time.

Ayes 276, Noes 272.

Division No. 168.]
AYES
[7.32 p.m.


Abse, Leo
Bence, Cyril
Braddock, Mrs. E. M.


Albu, Austen
Benn, Rt. Hn. Anthony Wedgwood
Bradley, Tom


Alldritt, Walter
Bennett, J. (Glasgow, Bridgeton)
Bray, Dr. Jeremy


Allen, Scholefield (Crewe)
Binns, John
Broughton, Dr. A. D. D.


Armstrong, Ernest
Bishop, E. S.
Brown, Hugh D. (Glasgow, Provan)


Atkinson, Norman
Blackburn, F.
Buchanan, Richard


Bacon, Miss Alice
Blenkinsop, Arthur
Butler, Herbert (Hackney, C.)


Bagier, Gordon A. T.
Boardman, H.
Butler, Mrs. Joyce (Wood Green)


Barnett, Joel
Boston, T. G.
Carmichael, Neil


Baxter, William
Bowden, Rt. Hn. H. W. (Leics S.W.)
Carter-Jones, Lewis


Beaney, Alan
Boyden, James
Castle, Rt. Hn. Barbara




Chapman, Donald
Hynd, H. (Accrington)
Pearson, Arthur (Pontypridd)


Coleman, Donald
Irvine, A. J. (Edge Hill)
Peart, Rt. Hn. Fred


Conlan, Bernard
Irving, Sydney (Dartford)
Pentland, Norman


Corbet, Mrs. Freda
Jackson, Colin
Perry, Ernest G.


Cousins, Rt. Hn. Frank
Jay, Rt. Hn. Douglas
Popplewell, Ernest


Craddock, George (Bradford, S.)
Jeger, George (Goole)
Prentice, R. E.


Crawshaw, Richard
Jeger, Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Price, J. T. (Westhoughton)


Cronin, John
Jenkins, Hugh (Putney)
Probert, Arthur


Crosland, Rt. Hn. Anthony
Jenkins, Rt. Hn. Roy (Stechford)
Pursey, Cmdr. Harry


Cullen, Mrs. Alice
Johnson, Carol (Lewisham, S.)
Randall, Harry


Dalyell, Tam
Johnson,James(K'ston-on-Hull,W.)
Rankin, John


Darling, George
Jones, Dan (Burnley)
Redhead, Edward


Davies, G. Elfed (Rhondda, E.)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Rees, Merlyn


Davies, Harold (Leek)
Jones, J. Idwal (Wrexham)
Reynolds, G. W.


Davies, Ifor (Gower)
Jones, T. W. (Merioneth)
Rhodes, Geoffrey


Delargy, Hugh
Kelley, Richard
Richard, Ivor


Dell, Edmund
Kenyon, Clifford
Roberts, Albert (Normanton)


Dempsey, James
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Roberts, Goronwy (Caernarvon)


Diamond, John
Kerr, Dr. David (W'worth, Central)
Robertson, John (Paisley)


Dodds, Norman
Lawson, George
Rodgers, William (Stockton)


Doig, Peter
Leadbitter, Ted
Rogers, George (Kensington, N.)


Donnelly, Desmond
Ledger, Ron
Rose, Paul B.


Driberg, Tom
Lee, Rt. Hn. Frederick (Newton)
Ross, Rt. Hn. William


Duffy, Dr. A. E. P.
Lee, Miss Jennie (Cannock)
Rowland, Christopher


Dunn, James A.
Lever, Harold (Cheetham)
Sheldon, Robert


Dunned, Jack
Lewis, Arthur (West Ham, N.)
Shinwell, Rt. Hn. E.


Edwards, Rt. Hn. Ness (Caerphilly)
Lewis, Ron (Carlisle)
Shore, Peter (Stepney)


English, Michael
Lipton, Marcus
Short,Rt.Hn.E.(N'c't1e-on-Tyne,C.)


Ennals, David
Lomas, Kenneth
Silkin, John (Deptford)


Ensor, David
Loughlin, Charles
Silkin, S. C. (Camberwell, Dulwich)


Evans, Albert (Islington, S.W.)
Mabon, Dr. J. Dickson
Silverman, Julius (Aston)


Evans, Ioan (Birmingham, Yardley)
McCann, J.
Skeffington, Arthur


Fernyhough, E.
MacColl, James
Slater, Mrs. Harriet (Stoke, N.)


Finch, Harold (Bedwellty)
MacDermot, Niall
Slater, Joseph (Sedgefield)


Fitch, Alan (Wigan)
McGuire, Michael
Small, William


Fletcher, Sir Eric (Islington, E.)
McInnes, James
Smith, Ellis (Stoke, S.)


Fletcher, Ted (Darlington)
McKay, Mrs. Margaret
Solomons, Henry


Fletcher, Raymond (Ilkeston)
Mackenzie, Gregor (Rutherglen)
Soskice, Rt. Hn. Sir Frank


Floud, Bernard
Mackie, John (Enfield, E.)
Stonehouse, John


Foley, Maurice
McLeavy, Frank
Stones, William


Foot, Sir Dingle (Ipswich)
MacPherson, Malcolm
Strauss, Rt. Hn. G. R. (Vauxhall)


Foot, Michael (Ebbw Vale)
Mahon, Peter (Preston, S.)
Summerskill, Hn. Dr. Shirley


Ford, Ben
Mahon, Simon (Bootle)
Swain, Thomas


Freeson, Reginald
Mallalieu, E. L. (Brigg)
Swingler, Stephen


Galpern, Sir Myer
Mallalieu,J.P.W.(Huddersfield,E.)
Symonds, J. B.


Garrett, W. E.
Mapp, Charles
Taylor, Bernard (Mansfield)


Garrow, A.
Mason, Roy
Thomas, George (Cardiff, W.)


Ginsburg, David
Mayhew, Christopher
Thomas, Iorwerth (Rhondda, W.)


Greenwood, Rt. Hn. Anthony
Mellish, Robert
Thomson, George (Dundee, E.)


Gregory, Arnold
Mendelson, J. J.
Thornton, Ernest


Grey, Charles
Mikardo, Ian
Tinn, James


Griffiths, David (Rother Valley)
Millan, Bruce
Tomney, Frank


Griffiths, Rt. Hn. James (Llanelly)
Miller, Dr. M. S.
Tuck, Raphael


Griffiths, Will (M'chester, Exchange)
Milne, Edward (Blyth)
Urwin, T. W.


Gunter, Rt. Hn. R. J.
Molloy, William
Varley, Eric G.


Hale, Leslie
Monslow, Walter
Wainwright, Edwin


Hamilton, James (Bothwell)
Morris, Alfred (Wythenshawe)
Walden, Brian (All Saints)


Hamilton, William (West Fife)
Morris, Charles (Openshaw)
Walker, Harold (Doncaster)


Hamling, William (Woolwich, W.)
Morris, John (Aberavon)
Wallace, George


Harper, Joseph
Mulley,Rt.Hn.Frederick(SheffieldPk)
Warbey, William


Harrison, Walter (Wakefield)
Murray, Albert
Watkins, Tudor


Hart, Mrs. Judith
Neal, Harold
Weitzman, David


Hattersley, Roy
Newens, Stan
Wells, William (Walsall, N.)


Hazell, Bert
Noel-Baker, Francis (Swindon)
White, Mrs. Eirene


Healey, Rt. Hn. Denis
Noel-Baker,Rt.Hn.Philip(Derby,S.)
Whitlock, William


Henderson, Rt. Hn. Arthur
Norwood, Christopher
Wigg, Rt. Hn. George


Herbison, Rt. Hn. Margaret
Oakes, Gordon
Wilkins, W. A.


Hill, J. (Midlothian)
Ogden, Eric
Willey, Rt. Hn. Frederick


Hobden, Dennis (Brighton, K'town)
Oram, Albert E. (E. Ham, S.)
Williams, Alan (Swansea, W.)


Holman, Percy
Orbach, Maurice
Williams, Clifford (Abertillery)


Horner, John
Orme, Stanley
Williams, Mrs. Shirley (Hitchin)


Houghton, Rt. Hn. Douglas
Owen, Will
Williams, W. T. (Warrington)


Howarth, Harry (Wellingborough)
Padley, Walter
Willis, George (Edinburgh, E.)


Howarth, Robert L. (Bolton, E.)
Page, Derek (King's Lynn)
Wilson, Rt. Hn. Harold (Huyton)


Howell, Denis (Small Heath)
Paget, R. T.
Wilson, William (Coventry, S.)


Howie, W.
Palmer, Arthur
Winterbottom, R. E.


Hoy, James
Pannell, Rt. Hn. Charles
Woodburn, Rt. Hn. A.


Hughes, Cledwyn (Anglesey)
Pargiter, G. A.
Woof, Robert


Hughes, Emrys (S. Ayrshire)
Park, Trevor (Derbyshire, S.E.)
Wyatt, Woodrow


Hughes, Hector (Aberdeen, N.)
Parker, John



Hunter, Adam (Dunfermline)
Parkin, B. T.
TELLERS FOR THE AYES:


Hunter, A. E. (Feltham)
Pavitt, Laurence
Mr. Gourlay and Mr. O'Malley.







NOES


Agnew, Commander Sir Peter
Fletcher-Cooke, Sir John (S'pton)
McLaren, Martin


Alison, Michael (Barkston Ash)
Foster, Sir John
Maclean, Sir Fitzroy


Allan, Robert (Paddington, S.)
Galbraith, Hn. T. G. D.
McMaster, Stanley


Allason, James (Hemel Hempstead)
Gammans, Lady
McNair-Wilson, Patrick


Anstruther-Gray, Rt. Hn. Sir W.
Gardner, Edward
Maginnis, John E.


Astor, John
Gibson-Watt, David
Maitland, Sir John


Awdry, Daniel
Giles, Rear-Admiral Morgan
Marples, Rt. Hn. Ernest


Baker, W. H. K.
Gilmour, Ian (Norfolk, Central)
Marten, Neil


Balniel, Lord
Gilmour, Sir John (East Fife)
Maude, Angus


Barber, Rt. Hn. Anthony
Glover, Sir Douglas
Mawby, Ray


Barlow, Sir John
Glyn, Sir Richard
Maxwell-Hyslop, R. J.


Batsford, Brian
Goodhart, Philip
Maydon, Lt.-Cmdr. S. L. C.


Bennett, Sir Frederic (Torquay)
Goodhew, Victor
Meyer, Sir Anthony


Bennett, Dr. Reginald (Gos &amp; Fhm)
Gower, Raymond
Mills, Peter (Torrington)


Berry, Hn. Anthony
Grant, Anthony
Mills, Stratton (Belfast, N.)


Bessell, Peter
Grant-Ferris, R.
Miscampbell, Norman


Biffen, John
Gresham Cooke, R.
Mitchell, David


Biggs-Davison, John
Grieve, Percy
Monro, Hector


Bingham, R. M.
Griffiths, Eldon (Bury St. Edmunds)
Morgan, W. G.


Birch, Rt. Hn. Nigel
Griffiths, Peter (Smethwick)
Morrison, Charles (Devizes)


Black, Sir Cyril
Grlmond, Rt. Hn. J.
Mott-Radclyffe, Sir Charles


Blaker, Peter
Gurden, Harold
Munro-Lucas-Tooth, Sir Hugh


Bossom, Hn. Clive
Hall, John (Wycombe)
Murton, Oscar


Bowden, Roderic (Cardigan)
Hall-Davis, A. G. F.
Neave, Airey


Box, Donald
Hamilton, Marquess of (Fermanagh)
Nicholls, Sir Harmar


Boyd-Carpenter, Rt. Hn. J.
Hamilton, M. (Salisbury)
Nicholson, Sir Godfrey


Boyle, Rt. Hn. Sir Edward
Harris, Frederic (Croydon, [...].W.)
Noble, Rt. Hn. Michael


Braine, Bernard
Harris, Reader (Heston)
Nugent, Rt. Hn. Sir Richard


Brewis, John
Harrison, Brian (Maldon)
Onslow, Cranley


Brinton, Sir Tatton
Harrison, Col. Sir Harwood (Eye)
Orr, Capt. L. P. S.


Bromley-Davenport,Lt.-Col.SirWalter
Harvey, Sir Arthur Vere (Macclesf'd)
Orr-Ewing, Sir Ian


Brooke, Rt. Hn. Henry
Harvey, John (Walthamstow, E.)
Osborn, John (Hallam)


Brown, Sir Edward (Bath)
Harvie Anderson, Miss
Osborne, Sir Cyril (Louth)


Bryan, Paul
Hastings, Stephen
Page, John (Harrow, W.)


Buchanan-Smith, Alick
Hawkins, Paul
Page, R. Graham (Crosby)


Buck, Antony
Hay, John
Pearson, Sir Frank (Clitheroe)


Bullus, Sir Eric
Heald, Rt. Hn. Sir Lionel
Percival, Ian


Burden, F. A.
Heath, Rt. Hn. Edward
Peyton, John


Butcher, Sir Herbert
Hendry, Forbes
Pickthorn, Rt. Hn. Sir Kenneth


Buxton, Ronald
Higgins, Terence L.
Pike, Miss Mervyn


Campbell, Gordon
Hiley, Joseph
Pitt, Dame Edith


Carlisle, Mark
Hill, J. E. B. (S. Norfolk)
Powell, Rt. Hn. J. Enoch


Carr, Rt. Hn. Robert
Hirst, Geoffrey
Price, David (Eastleigh)


Cary, Sir Robert
Hobson, Rt. Hn. Sir John
Prior, J. M. L.


Chataway, Christopher
Hogg, Rt. Hn. Quintin
Pym, Francis


Chichester-Clark, R.
Hooson, H. E.
Quennell, Miss J. M.


Clark, Henry (Antrim, N.)
Hopkins, Alan
Ramsden, Rt. Hn. James


Clark, William (Nottingham, S.)
Hordern, Peter
Redmayne, Rt. Hn. Sir Martin


Clarke, Brig. Terence (Portsmth,W.)
Hornby, Richard
Rees-Davies, W. R.


Cole, Norman
Howard, Hn. G. R. (St. Ives)
Renton, Rt. Hn. Sir David


Cooke, Robert
Howe, Geoffrey (Bebington)
Ridsdale, Julian


Cooper, A. E.
Hunt, John (Bromley)
Roberts, Sir Peter (Heeley)


Cooper-Key, Sir Neill
Iremonger, T. L.
Robson Brown, Sir William


Cordle, John
Irvine, Bryant Godman (Rye)
Rodgers, Sir John (Sevenoaks)


Corfield, F. V.
Jenkin, Patrick (Woodford)
Roots, William


Costain, A. P.
Jennings, J. C.
Royle, Anthony


Courtney, Cdr. Anthony
Johnson Smith, G. (East Grinstead)
Russell, Sir Ronald


Craddock, Sir Beresford (Spelthorne)
Johnston, Russell (Inverness)
St. John-Stevas, Norman


Crawley, Aldan
Jones, Arthur (Northants, S.)
Scott-Hopkins, James


Crosthwaite-Eyre, Col. Sir Oliver
Jopling, Michael
Sharpies, Richard


Crowder, F. P.
Joseph, Rt. Hn. Sir Keith
Shepherd, William


Cunningham, Sir Knox
Kaberry, Sir Donald
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Curran, Charles
Kerby, Capt. Henry
Smyth, Rt. Hn. Brig. Sir John


Currie, G. B. H.
Kerr, Sir Hamilton (Cambridge)
Spearman, Sir Alexander


Dalkeith, Earl of
Kilfedder, James A.
Speir, Sir Rupert


Dance, James
Kimball, Marcus
Stainton, Keith


Davies, Dr. Wyndham (Perry Barr)
King, Evelyn (Dorset, S.)
Stanley, Hn. Richard


d'Avigdor-Goldsmid, Sir Henry
Kirk, Peter
Stodart, Anthony


Dean, Paul
Lagden, Godfrey
Stoddart-Scott, Col. Sir Malcolm


Deedes, Rt. Hn. W. F.
Lambton, Viscount
Studholme, Sir Henry


Digby, Simon Wingfield
Lancaster, Col. C. G.
Talbot, John E.


Doughty, Charles
Langford-Holt, Sir John
Taylor, Sir Charles (Eastbourne)


Douglas-Home, Rt. Hn. Sir Alec
Lewis, Kenneth (Rutland)
Taylor, Edward M. (G'gow,Cathcart)


Drayson, G. B.
Litchfield, Capt. John
Taylor, Frank (Moss Side)


du Cann, Rt. Hn. Edward
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Teeling, Sir William


Eden, Sir John
Lloyd, Ian (P'tsm'th, Langstone)
Temple, John M.


Elliot, Capt. Walter (Carshalton)
Longbottom, Charles
Thatcher, Mrs. Margaret


Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Longden, Gilbert
Thomas, Sir Leslie (Canterbury)


Eyre, Reginald
Loveys, Walter H.
Thomas, Rt. Hn. Peter (Conway)


Farr, John
Lubbock, Eric
Thompson, Sir Richard (Croydon,S.)


Fell, Anthony
Lucas, Sir Jocelyn
Thorneycroft, Rt. Hn. Peter


Fisher, Nigel
McAdden, Sir Stephen
Tiley, Arthur (Bradford, W.)


Fletcher-Cooke, Charles (Darwen)
Mackenzie, Alasdair (Ross&amp;Crom'ty)
Tilney, John (Wavertree)







Turton, Rt. Hn. R. H.
Ward, Dame Irene
Wood, Rt. Hn. Richard


Tweedsmuir, Lady
Weatherill, Bernard
Woodhouse, Hn. Christopher


van Straubenzee, W. R.
Wells, John (Maidstone)
Woodnutt, Mark


Vaughan-Morgan, Rt. Hn. Sir John
Whitelaw, William
Wylie, N. R.


Vickers, Dame Joan
Williams, Sir Rolf Dudley (Exeter)
Younger, Hn. George


Walder, David (High Peak)
Wills, Sir Gerald (Bridgwater)



Walker, Peter (Worcester)
Wilson, Geoffrey (Truro)
TELLERS FOR THE NOES:


Walker-Smith, Rt. Hn. Sir Derek
Wise, A. R.
Mr. MacArthur and Mr. More.


Walters, Dennis
Wolrige-Gordon, Patrick

7.45 p.m.

Mr. E. Shinwell: On a point of order, Sir Samuel. Will you, in view of the possibility of hon. Members being obstructed, quite accidentally—[Interruption.] I am accustomed to the traditions of the Committee and I am putting a point of order. Will you, Sir Samuel, in view of the possibility, quite fortuitously, of the entrances being obstructed in some way, give directions that there should be no blockage in the entrances of the Division Lobbies?

The Deputy-Chairman: To give a direction of that sort would be somewhat hypothetical, but I hope that hon. Members will see that the entrances are kept clear during a Division.
With the next Amendment, No. 550, we can also take Amendment No. 605, in page 53, line 5, at end insert:
Provided that where an election is made under this subsection for the purposes of section 43 of this Act, where the company receiving the dividends to which this subsection applies itself makes a distribution, it shall be treated as having suffered income tax by deduction to the extent that the company paying to it dividends gross has itself suffered income tax by deduction on dividends received.
and Amendment No. 635, in line 5, at end insert:
(4) Notwithstanding the foregoing provisions of this section where a company paying a dividend is a company to which paragraph (a) or (b) of subsection (3) applies and the company has received franked investment income before paying the dividend, if an election has been made under subsection (3), an amount of the dividend equal to the franked investment income of the company, not previously taken into account, shall be treated as franked investment income of the company receiving the dividend.

Mr. Patrick Jenkin: I beg to move Amendment No. 550, in page 52, line 41, after "received", to insert:
or such proportion of them as they may jointly elect".
Before explaining the Amendment I cannot forbear from the comment that the Government are obviously getting very jittery and ready with any excuses about their votes.
I must also say I was extremely disappointed—

Mr. Diamond: I think I could not quite have heard what the hon. Member said. Which Amendment did he say the word "jittery" was in?

Mr. Jenkin: If the Chief Secretary thinks that the word "jittery" is in the Bill he has got it badly.
I was very disappointed at the reply of the Minister without Portfolio. I am perfectly certain that he will make amends and try to do better this time. He did not give the impression that he convinced anybody, even himself.
This is a short and technical Amendment and I shall move it extremely briefly. I would remind the Committee that the basic provision for dividends between companies is that dividend from, let us say, a subsidiary to a parent must be paid net after deduction of tax and the tax is accounted for to the Revenue unless the companies jointly elect that the dividend should be paid gross. In those circumstances it can be paid gross. This Amendment is intended to allow the subsidiary and the parent to elect that part of the dividend should be paid gross and that part should be paid net.
The point is that a subsidiary company may itself receive dividends which are franked investment income paid subject to tax. In those circumstances, unless it has itself paid tax on its dividends, it has no means of setting off the tax on the dividends it has received. It pays the whole dividend gross, and there is no way of making use of the very proper provisions contained in this Clause for avoiding the double taxation of dividends.
It seems to me that this is clearly unfair and that the subsidiary company in those circumstances should be entitled, with the parent's consent, so to arrange its affairs that it can take advantage of the arrangements which the Bill allows. The Amendment would achieve this and enable them to elect that part of the


dividend should be paid gross and part net.
The Chief Secretary may say, "In those circumstances, why does not the parent say that it will not elect that the whole dividend be paid net and then the subsidiary can take advantage of the provision for avoiding the double taxation of dividends?". This may be inappropriate. The parent company may wish to have the dividend paid gross. It may be a relatively small part of the subsidiary's income which consists of franked investment. In those circumstances, it would be unjust that the whole of the subsidiary's own dividend should be declared net and the tax accounted for to the Revenue merely to allow it to take advantage of the provisions relating to the avoidance of double taxation.
This is a very reasonable point, and I hope that the Government will be a little more forthcoming on it than they were on what my right hon. and hon. Friends and I considered to be the very reasonable Amendment which I moved previously.

Mr. Diamond: I understood, Sir Samuel, that you agreed that we should discuss two other Amendments at the same time. However, that is apparently net for the convenience of the Committee. Therefore, perhaps I could answer the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) on the Amendment which he has moved.

The Deputy-Chairman: The Amendment selected is No. 550. We are discussing with it Amendments Nos. 605 and 635.

Sir John Barlow: I wish to mention Amendment No. 635 very briefly. It is very similar to the Amendment moved by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin).
As the Clause stands, if a subsidiary company receives part of its income in the form of franked investment from other United Kingdom companies and wishes to pay those dividends to its parent company, it is impossible to do so without deduction of tax, and there is no means of recovering that tax. I cannot think that the Chief Secretary or the Chancellor of the Exchequer really meant this. I think that it was an over

sight, and I hope that the Chief Secretary will see fit to remedy the situation.

Mr. Diamond: It is not the Government's intention to take a completely inflexible view of any suggestions about machinery and administration, but the proposal put forward by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) is extremely complicated and I doubt whether it could work. His proposal is that an election should be made jointly by parent and subsidiary as regards each dividend received. The proposal in the Bill is that there should be an election made each year. Under normal administration, that is going a long way to meet the administrative convenience of the taxpayer. An election, once made, would last a year, and a change could be made in a year's time and an election made the opposite way.
I understood the hon. Gentleman to say that there should be an election made jointly by parent and subsidiary with regard to each separate dividend. I think that it would be almost impossibly difficult to administer. Therefore, all I can say is that I will promise to consider the matter in connection with the hon. Gentleman's comments. I cannot offer any real hope, but it is right that I should offer to consider it as it is mainly a matter of administration, and we do not want the convenience of the Inland Revenue to be put in advance of the convenience of the taxpayer.
Amendment No. 635 goes too far, because it would allow the income tax borne to be used as relief in respect of losses or of a management claim by the parent company, and that is certainly not intended. We have arrived at a very reasonable halfway house as between franking and non-franking. It is the Opposition's desire that the Corporation Tax should not enable companies to grow fat. That has been made clear from the word go. That is a view with which we on this side of the Committee associate ourselves.
The arrangement made in the Bill goes not an uncomfortable way but a very short way to achieving that, and I should have thought that it was the best possible arrangement. I want to make it perfectly clear that I can hold out no hope about the Amendment in the name of the hon. Member for Middleton and


Prestwich (Sir J. Barlow), but I am prepared to look again at the Amendment moved by the hon. Member for Wanstead and Woodford, although I am bound to say that it seems to me that it would be too clumsy, too difficult and too complicated to administer.

Mr. William Clark: Suppose that company A, which is a subsidiary, receives from another company a dividend which it wants to pay over to its parent company B. As I understand the Clause, it is not allowed to use the tax deducted from company C when it pays the dividend to B. Perhaps the Chief Secretary would undertake to look at this anomaly. I am sure that it is not intended by the Clause.
The same anomaly arises in the case of a subsidiary of a life assurence company which in turn receives franked and unfranked investment income. Because it comes from a third source, the grouping arrangement between parent and subsidiary is then lost. It may be that my reading of the Clause is incorrect. If it is, I shall be delighted if the Chief Secretary will correct it. However, if I am right, I hope that he will undertake to put this anomaly right on Report.

Mr. Diamond: It may be that the hon. Gentleman is asking for something for which there is provision already. He has been perfectly straightforward about this point. It is not a simple matter or one on which we should want to jump to conclusions on the basis of a few words spoken by hon. Members on both sides of the Committee. Therefore, I shall undoubtedly look at the points which have been raised between now and Report.

Mr. W. R. van Straubenzee: I am sure that the Chief Secretary has replied in what he thinks is, and which we accept as, a conciliatory way, but I wonder whether he would consider this point. As I understood his argument, he was attacking not the principle put forward by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), but the difficulty of administration. In turn, he founded that on the difficulty, as he saw it, if the election were made for each declared dividend.
I have not had a chance of considering that matter in relation to the

Schedules, but I wonder whether the difficulty is as great as the hon. Gentleman appears to think it is. There would surely be no difficulty if the election were made annually rather than in terms of each individual dividend. I hope that he will look at this point, because it would be of immense benefit for franked income to be set off by the subsidiary to the parent company.

8.0 p.m.

Mr. Barber: As my hon. Friend has just pointed out, the Chief Secretary has been forthcoming. I am sure that he will agree, first, that if it were practical to do something on the lines suggested by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), this would be of considerable advantage to certain companies. I am sure he will also accept that if what my hon. Friend wishes to do could be implemented, it would result in no loss of revenue and would not give rise to tax avoidance.
Therefore, we return to the same issue as before, namely, the extent to which this proposal would be inconvenient, difficult or impractical for the Inland Revenue. I am sure that my hon. Friend the Member for Wanstead and Woodford, who has had considerable experience of these matters, would not wish to press any Amendment too far if it imposed an intolerable burden of work on the Inland Revenue.
The Amendment is a serious one and is put forward responsibly. We wish to consider what the Chief Secretary has said. In the light of our own further investigations, we may wish to return to the matter on Report. Meanwihle, in the light of what has been said, I hope that my hon. Friend will seek leave to withdraw his Amendment.

Mr. Patrick Jenkin: I am happy to withdraw the Amendment. Before doing so, however, I reinforce the point made by my hon. Friend the Member for Wokingham (Mr. van Straubenzee) that there is no suggestion that anything more than the annual election should continue to apply to such proportion of the dividend as is jointly elected, that the provisions of Schedule 11 should apply to this and that the election should remain in force for the year. All those provisions would apply. It does not seem


to me that this is a provision which would give rise to such difficulty as to make it impossible to carry it into effect and so relieve companies, in the circumstances which I described earlier, of the risk of the double taxation of their investments. They might be in a position to pay their own dividends gross and have no income against which they can set off tax which has been deducted from the dividends received. Having said that, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clause 45.—(GENERAL SCHEME OF CORPORATION TAX.)

Mr. Diamond: I beg to move Amendment No. 338, in page 54, line 19, to leave out "that income" and to insert "those profits".
This is purely a drafting Amendment. I am sure that it is not necessary to spend time on it.

Mr. Barber: I do not quite understand how this is a mere drafting Amendment. If one looks back to the words "income" and "profits" in Clause 42(4), one sees that
'profits' means income and chargeable gains".
As Clause 45(2) was originally drafted, a company to which capital gains accrued in a fiduciary capacity would not have been liable to tax in respect of those capital gains, regardless of whether they accrued to it, in the words of the subsection, in "its own beneficial interest". Surely, the Amendment would make those capital gains liable to tax if they were received by the company in its own beneficial interest. That being the case, this does not appear to me to be a mere drafting Amendment. It brings into charge capital gains which, as the Bill is drafted, would not be brought into charge. Unless we can have a clear answer that this is not the case, as it seems patently to be from reading the Amendment, in line with the attitude which we have taken throughout the Bill concerning double taxation between companies and individual shareholders, we will have to divide against the Amendment.

Mr. Peyton: It seems from what is going on that my right hon. and hon.

Friends have been seriously at fault in their handling of the Bill. What they should have done with their Amendments, many of which have been extraordinarily sensible and desirable, is not to have made speeches, but simply to have said that they were drafting Amendments. Then, we would undoubtedly have had a very different Bill.
I am at a complete loss to understand how the Chief Secretary can move an Amendment to substitute such very different words as "income" and "profits". If we could take it from the Chief Secretary that those words can normally be equated throughout the Bill, it would lead to some interesting consequences. I would not normally be bold enough to speak for my right hon. and hon. Friends, but they must be grateful to the Chief Secretary for the lesson which he has taught us that, under the heading of a drafting Amendment, almost anything is possible. I express my surprise and some disappointment that the Solicitor-General is not present to move a drafting Amendment, because that is normally his province.

Mr. Hirst: I agree with the general remarks of my hon. Friend the Member for Yeovil (Mr. Peyton) about the drafting. The same things as my hon. Friends have said have struck me forcibly. We want more explanation from the Chief Secretary.
I have done a little research on this matter and I find that the terms of what the hon. Gentleman calls this drafting Amendment appear also in Amendments No. 340, in Clause 52, page 64, line 34, and No. 610, in Clause 54, page 66, line 10. It gets curiouser and curiouser as we go on. We want to be assured of what is afoot. I do not pretend to know.
I know that in some European countries "income" and "profits" mean the same thing, but in the Bill the difference is significant. There is something extraordinarily subtle about this. I do not suggest that the Chief Secretary is withholding information from the Committee, but perhaps he has not been completely informed. In all my experience, I have never heard of so fundamental a change as this appears to be in several parts of the Bill being dismissed simply as a drafting Amendment to be taken by the Committee "on the nod".

Mr. Diamond: The task of those who pilot a Finance Bill through Committee is not the easiest task under the sun. I endeavour to deal shortly with a short point and at length with a more important point. I must, however, admit that this is the first time that I have engaged in this responsible duty. No doubt, I shall get better as the years go by.
The reason why I say that this is a drafting Amendment is that I have it on the best possible authority that it is purely a drafting Amendment—I repeat, "on the best possible authority", which everyone who has ever handled a brief will immediately appreciate. Let me, however, explain it in greater length to demonstrate that it is purely a drafting Amendment and that I was not attempting, as I am grateful to the Committee for accepting that I did not attempt, to deal with an Amendment of substance as if it were a drafting Amendment.
Under subsection (1), a company is chargeable to Corporation Tax on the whole of its profits. "Profits" is a comprehensive term which is earlier defined in Clause 42 to include not only ordinary income, but also chargeable capital gains. That is the first position. The closing lines of subsection (2) of the Clause do not refer to the word "profits" but refer to "income". It intends to refer to the same totality as previously and by error the word "income" crept in instead of "profits". So that instead of the word "income", there should be read at the end "profits". If that is substituted, the subsection would mean that any profits which the company receives as a trustee would not bear tax to the extent that the company has a beneficial interest therein.
It does not affect in the slightest the question of trusteeship or beneficial interest. That aspect is fully protected. All that the subsection states is that whereas we were always talking about profits, we shall continue to talk about them and "income" had crept in inadvertently.

Mr. Norman Cole: While I would not make the slightest suggestion about the hon. Member's being other than completely open, does he not nevertheless realise that if "income", which originally appeared in the Clause, and which has a limited connotation,

is now to be substituted by "profits", it is rather more than a drafting alteration?

Mr. Diamond: I cannot accept that it is more than a drafting alteration. The hon. Member interprets "income" entirely differently from the way I interpret it. This is a drafting Amendment to make the Clause read consistently. The Clause as amended will read consistently. Unamended, it does not read consistently.

Mr. Barber: I am sure that it is not the wish of the Committee that we should pursue this matter now that the Chief Secretary has explained it. There is, however, no question of anybody having any difference of opinion as to the meaning of "income" and "profits." The word "income" appears in the Bill and it specifically excludes chargeable gains. In other words, wherever "income" appears it means that there is no charge to Corporation Tax in respect of chargeable gains. This is the whole point of the later words of Clause 42. This is, therefore, a change of substance.
The Chief Secretary may say that this is only a small matter, but the whole of subsection (2) is concerned with profits arising under a partnership and also with profits arising to a company in a fiduciary capacity. It then goes on, however, to say that certain things shall happen in respect of those profits as regards its own beneficial interest in that income. If it means what it says—and it certainly says "income"—"income", for the reasons which I have just mentioned, excludes chargeable gains. I see the reason for the change and, no doubt, this is an error, but it is certainly more than an error of drafting because it brings into charge to Corporation Tax chargeable gains which would not be within the charge to Corporation Tax if the word "income" remained. This is the whole purpose of the change which the Chief Secretary is making.
The hon. Gentleman is doing something to which we have objected in the past. Where a company receives income in a fiduciary capacity, as regards its own beneficial interest it is now to be charged to Corporation Tax in respect of that capital gain and later, if a member of the company sells the shares, there will be another instance of double taxation. However, as the hon. Gentleman has


now explained the purpose of the Amendment, although it is an Amendment which runs counter to what we have tried to do in the past, we have expressed our views sufficiently forcibly in the Division Lobby on the general principle and, therefore, I do not think that we need on this occasion press the Amendment to a Division.

Amendment agreed to.

Question proposed, That the Clause, as amended, stand part of the Bill.

8.15 p.m.

Mr. A. P. Costain: There is one issue on this Clause to which I ask the Chief Secretary to give his attention. If my contention is right and we cannot get a satisfactory explanation, this is one of the biggest flaws in the whole of the Bill.
As I read the Clause, I would expect to find an appeal procedure incorporated in it. I have discussed this matter with many of my accountant friends and some of the leading accountants in the country agree with my view.
Subsection (7) sets out the procedure and says:
Corporation tax shall be under the care and management of the Commissioners of Inland Revenue (in this Part of this Act referred to as 'the Board'), and the Board may do all such acts as may be deemed necessary and expedient for raising, collecting, receiving and accounting for the tax in the like manner as they are authorised to do with relation to any other duties under their care and management."—
and it goes on, and this is the most important part, to say:
and all enactments relating to the assessing, collecting, receiving and accounting for income tax, so far as they are consistent with the provisions of this Part of this Act, shall apply in like manner as nearly as may be in relation to corporation tax.
Those words are of the greatest importance. The Committee will know that while the provisions of Income Tax relating to assessing, collecting, receiving and accounting are specifically made to apply to Corporation Tax, the assessing procedure is dealt with in the Income Tax Act, 1952, Chapter 2, and the Income Tax Management Act, 1964, while collecting and receiving procedures are dealt with in the Income Tax Act, 1952, Chapter 4, and the Income Tax Management Act, 1964, and the procedure for accounting for Income Tax is dealt with

in the Fourth Schedule of the Income Tax Act, 1952, the procedure for appeal is prescribed in the Income Tax Act, 1952, Chapter III. However, that chapter is not made to apply to Corporation Tax, and that is the strength of my submission. I am fortified by the fact that specific provisions for appeal are made in that Ninth Schedule.
If a Bill of this sort, colossal as it is and unjust as it is, were to contain no provision for appeals against Corporation Tax, there would be no need to have anything else in the Bill at all, because the Inland Revenue could assess any company to any amount it liked, and even if it made the greatest howler on earth, there would be no legislation to put that right, and all the problems of the Government about the nationalisation of steel would be solved by the making of tax assessments.
I ask the Chief Secretary to give us a clear assurance that there is an appeal procedure and to tell us where it can be found.

Mr. Diamond: I can give a categorical assurance. It would be unthinkable for there to be no appeal procedure incorported in the Bill. The hon. Gentleman has drawn attention to the last four lines of the Clause:
… all enactments relating to the assessing, collecting, receiving and accounting for income tax
I am advised that those words clearly mean that the appeal procedure is imported into the Corporation Tax along with these others and that there is no question but that those words carry that meaning.
The hon. Gentleman has discussed this matter with, I think he said, his professional advisers and he said that it did not jump to their eyes that the appeal procedure was in the Bill. It is right that it should be clearly seen by everybody to be in the Bill and if the Committee would wish it, my right hon. Friend will consider with his advisers whether it is necessary on Report to add a short Amendment making it absolutely clear that there is such a procedure, so that it will be clear beyond doubt that there is an appeal procedure as for Income Tax purposes.

Sir John Hobson: I am grateful to the hon.


Gentleman for taking that attitude and I am sure that it will be welcomed. It is desirable to include a reference to appeals, because Chapter 2 of Part II of the 1952 Act deals with returns and assessments and Chapter 4 with assessments, while in between appeals are dealt with.
It is plain that whole chapters of the Income Tax Act, 1952, are referred to, but the one in between, which is the relevant one dealing with appeals, is not. While it may be true that a strict interpretation would regard appeals as being included, I would have thought that there could be no disadvantage and great advantages in preventing anybody from taking the point that there was no appeal procedure.
We are, therefore, very grateful for the attitude which the Chief Secretary has taken and we hope that when he reconsiders the matter he will find every reason for putting in and no reason for leaving out a provision concerning appeals.

Mr. Barber: I shall say no more about the appeal provisions, because I am sure in the light of what has been said that we shall see a suitable Amendment on Report. However, I have another issue to raise. It is an issue on which I do not expect an answer tonight, but which I would like the Chief Secretary to consider. This time it is purely a matter of drafting in subsection (2).
This deals with profits arising from a partnership. Taking the example of two companies operating in partnership and assuming that each is entitled to one half of the partnership profits and that the partnership profits amount to £10,000, then as the subsection says:
profits … arising under any partnership
each company would be liable to Corporation Tax on the full £10,000.
I appreciate that this is obviously not the intention, but the words run like this:
A company shall be chargeable to corporation tax on profits … arising under any partnership"—
and those are the total profits—
in any case in which it"—
that is, one of the partners—
would be so chargeable if the profits accrued to it directly …
All I am saying is that there seems to be—and I have consulted legal luminaries

more eminent than I can ever hope to be—some doubt and it seems to arise from the fact that the words
accruing for its benefit
do not appear, at any rate at first sight, to govern the words
arising under any partnership.
All I am asking is that another look will be taken at the wording to see whether there is any duplication of charge.
I draw the attention of the Committee to the extraordinary powers given by subsection (7) to the Inland Revenue. We are here dealing with a new tax, the Corporation Tax and I think that the whole Committee will agree that it is, therefore, right that we should scrutinise with care the powers given to the Inland Revenue, even though they may be the same powers given in other taxes. When one is coming to a a new tax—and, after all, we are told by the Chancellor that he is one of the greatest tax reformers for the last 100 years—we must consider them with care.
I ask the hon. Gentleman why it is necessary to have the words in subsection (7):
and the Board may do all such acts as may be deemed necessary"?
Why cannot we simply have:
do all such acts as are necessary"?
Who is to do the deeming? Why does the Inland Revenue need all the powers given by the words:
with relation to any other duties under their care and management"?
Why should not the duties be limited to those concerned with Income Tax and Capital Gains Tax, which are the only two taxes relevant to the Corporation Tax?
The consequence of the subsection is that one has first to look through all the existing enactments concerned with Income Tax, the whole lot, which are for
the assessing, collecting, receiving and accounting for income tax
to see whether there is anything inconsistent, and, finally, one has to equate the conclusion one has reached to the concluding words of the subsection
as nearly as may be".
With a brand new tax and a reforming Chancellor that is going too far. It is all right with existing taxation, when there


are similar words which have been considered and interpreted, but the hon. Gentleman could have done a little better on this occasion.
Quite apart from these matters, the whole Clause, as the side note says, is concerned specifically with the general scheme of the Corporation Tax. The Committee will be aware from what my right hon. Friend the Member for Bexley (Mr. Heath) and I said yesterday that our main complaint against the proposals

of the Chancellor is not against the Corporation Tax as such, but against the scheme which he has sought to introduce. We made this abundantly clear yesterday, and as the Clause is concerned with the scheme of the Corporation Tax it is only right that I should advise my right hon. and hon. Friends to vote against it.

Question put, That the Clause, as amended, stand part of the Bill:—

The Committee divided: Ayes 278, Noes 272.

Division No. 169.]
AYES
[8.27 p.m.


Abse, Leo
Ensor, David
Jones, Dan (Burnley)


Albu, Austen
Evans, Albert (Islington, S.W.)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)


Allaun, Frank (Salford, E.)
Evans, loan (Birmingham, Yardley)
Jones, J. Idwal (Wrexham)


Alldritt, Walter
Fernyhough, E.
Jones, T. W. (Merioneth)


Allen, Scholefield (Crewe)
Finch, Harold (Bedwellty)
Kelley, Richard


Armstrong, Ernest
Fitch, Alan (Wigan)
Kenyon, Clifford


Atkinson, Norman
Fletcher, Sir Eric (Islington, E.)
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Bacon, Miss Alice
Fletcher, Ted (Darlington)
Kerr, Dr. David (W'worth, Central)


Bagier, Gordon A. T.
Fletcher, Raymond (Ilkeston)
Lawson, George


Barnett, Joel
Floud, Bernard
Leadbitter, Ted


Baxter, William
Foley, Maurice
Ledger, Ron


Beaney, Alan
Foot, Sir Dingle (Ipswich)
Lee, Rt. Hn. Frederick (Newton)


Bence, Cyril
Foot, Michael (Ebbw Vale)
Lee, Miss Jennie (Cannock)


Benn, Rt. Hn. Anthony Wedgwood
Ford, Ben
Lever, Harold (Cheetham)


Bennett, J. (Glasgow, Bridgeton)
Freeson, Reginald
Lewis, Arthur (West Ham, N.)


Binns, John
Galpern, Sir Myer
Lewis, Ron (Carlisle)


Bishop, E. S.
Garrett, W. E.
Lipton, Marcus


Blackburn, F.
Garrow, A.
Lomas, Kenneth


Blenkinsop, Arthur
Ginsburg, David
Loughlin, Charles


Boardman, H.
Gourlay, Harry
Mabon, Dr. J. Dickson


Boston, T. G.
Greenwood, Rt. Hn. Anthony
McCann, J.


Bowden, Rt. Hn. H. W. (Leics S.W.)
Gregory, Arnold
MacColl, James


Boyden, James
Griffiths, David (Rother Valley)
MacDermot, Niall


Braddock, Mrs. E. M.
Griffiffiths, Rt. Hn. James (Lianelly)
McGuire, Michael


Bradley, Tom
Griffiths, Will (M'chester, Exchange)
McInnes, James


Bray, Dr. Jeremy
Gunter, Rt. Hn. R. J.
McKay, Mrs. Margaret


Broughton, Dr. A. D. D.
Hale, Leslie
Mackenzie, Gregor (Rutherglen)


Brown, Hugh D. (Glasgow, Provan)
Hamilton, James (Bothwell)
Mackie, John (Enfield, E.)


Buchanan, Richard
Hamilton, William (West Fife)
McLeavy, Frank


Butler, Herbert (Hackney, C.)
Hamling, William (Woolwich, W.)
MacPherson, Malcolm


Butler, Mrs. Joyce (Wood Green)
Harper, Joseph
Mahon, Peter (Preston, S.)


Carmichael, Neil
Harrison, Walter (Wakefield)
Mahon, Simon (Bootle)


Carter-Jones, Lewis
Hart, Mrs. Judith
Mallalieu, E. L. (Brigg)


Castle, Rt. Hn. Barbara
Hattersley, Roy
Mallalieu,J.P.W.(Huddersfield,E.)


Chapman, Donald
Hazell, Bert
Mapp, Charles


Coleman, Donald
Healey, Rt. Hn. Denis
Mason, Roy


Conlan, Bernard
Henderson, Rt. Hn. Arthur
Mayhew, Christopher


Corbet, Mrs. Freda
Herbison, Rt. Hn. Margaret
Mellish, Robert


Cousins, Rt. Hn. Frank
Hill, J. (Midlothian)
Mendelson, J. J.


Craddock, George (Bradford, S.)
Hobden, Dennis (Brighton, K'town)
Mikardo, Ian


Crawshaw, Richard
Holman, Percy
Millan, Bruce


Cronin, John
Horner, John
Miller, Dr. M. S.


Crosland, Rt. Hn. Anthony
Houghton, Rt. Hn. Douglas
Milne, Edward (Blyth)


Crossman, Rt. Hn. R. H. S.
Howarth, Harry (Wellingborough)
Molloy, William


Cullen, Mrs. Alice
Howarth, Robert L. (Bolton, E.)
Monslow, Walter


Dalyell, Tam
Howell, Denis (Small Heath)
Morris, Alfred (Wythennshawe)


Darling, George
Howie, W.
Morris, Charles (Openshaw)


Davies, G. Elfed (Rhondda, E.)
Hoy, James
Morris, John (Aberavon)


Davies, Harold (Leek)
Hughes, Cledwyn (Anglesey)
Mulley,Rt.Hn.Frederlck(SheffieldPk)


Davies, Ifor (Gower)
Hughes, Emrys (S. Ayrshire)
Murray, Albert


Delargy, Hugh
Hughes, Hector (Aberdeen, N.)
Neal, Harold


Dell, Edmund
Hunter, Adam (Dunfermline)
Newens, Stan


Dempsey, James
Hunter, A. E. (Feltham)
Noel-Baker, Francis (Swindon)


Diamond, John
Hynd, H. (Accrington)
Noel-Baker,Rt.Hn.Phillp(Derby,S.)


Dodds, Norman
Irvine, A. J. (Edge Hill)
Norwood, Christopher


Doig, Peter
Irving, Sydney (Dartford)
Oakes, Gordon


Donnelly, Desmond
Jackson, Colin
Ogden, Eric


Driberg, Tom
Jay, Rt. Hn. Douglas
Oram, Albert E. (E. Ham, S.)


Duffy, Dr. A. E. P.
Jeger, George (Goole)
Orbach, Maurice


Dunn, James A.
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Orme, Stanley


Dunnett, Jack
Jenkins, Hugh (Putney)
Owen, Will


Edwards, Rt. Hn. Ness (Caerphilly)
Jenkins, Rt. Hn. Roy (Stechford)
Padley, Walter


English, Michael
Johnson, Carol (Lewisham, S.)
Page, Derek (King's Lynn)


Ennals, David
Johnson,James(K'ston-on-Hull,W.)
Paget, R. T.




Palmer, Arthur
Rowland, Christopher
Urwin, T. W.


Pannell, Rt. Hn. Charles
Sheldon, Robert
Varley, Erie G.


Parglter, G. A.
Shinwell, Rt. Hn. E.
Wainwright, Edwin


Park, Trevor (Derbyshire, S.E.)
Shore, Peter (Stepney)
Walden, Brian (All Saints)


Parker, John
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Walker, Harold (Doncaster)


Parkin, B. T.
Silkin, John (Deptford)
Wallace, George


Pavitt, Laurence
Silkin, S. C. (Camberwell, Dulwich)
Warbey, William


Pearson, Arthur (Pontypridd)
Silverman, Julius (Aston)
Watkins, Tudor


Peart, Rt. Hn. Fred
Skeffington, Arthur
Weitzman, David


Pentland, Norman
Slater, Mrs. Harriet (Stoke, N.)
Wells, William (Walsall, N.)


Perry, Ernest G.
Slater, Joseph (Sedgefield)
White, Mrs. Eirene


Popplewell, Ernest
Small, William
Whitlock, William


Prentice, R. E.
Smith, Ellis (Stoke, S.)
Wigg, Rt. Hn. George


Price, J. T. (Westhoughton)
Solomons, Henry
Wilkins, W. A.


Probert, Arthur
Soskice, Rt. Hn. Sir Frank
Willey, Rt. Hn. Frederick


Pursey, Cmdr. Harry
Stonehouse, John
Williams, Alan (Swansea, W.)


Randall, Harry
Stones, William
Williams, Clifford (Abertillery)


Rankin, John
Strauss, Rt. Hn. G. R. (Vauxhall)
Williams, Mrs. Shirley (Hitchin)


Redhead, Edward
Summerskill, Hn. Dr. Shirley
Williams, W. T. (Warrington)


Rees, Merlyn
Swain, Thomas
Willis, George (Edinburgh, E.)


Reynolds, G. W.
Swingler, Stephen
Wilson, Rt. Hn. Harold (Huyton)


Rhodes, Geoffrey
Symonds, J. B.
Wilson, William (Coventry, S.)


Richard, Ivor
Taylor, Bernard (Mansfield)
Winterbottom, R. E.


Roberts, Albert (Normanton)
Thomas, George (Cardiff, W.)
Woodburn, Rt. Hn. A.


Roberts, Goronwy (Caernarvon)
Thomas, lorwerth (Rhondda, W.)
Woof, Robert


Robertson, John (Paisley)
Thomson, George (Dundee, E.)
Wyatt, Woodrow


Rodgers, William (Stockton)
Thornton, Ernest



Rogers, George (Kensington, N.)
Tinn, James
TELLERS FOR THE AYES:


Rose, Paul B.
Tomney, Frank
Mr. O'Malley and Mr. Grey.


Ross, Rt. Hn. William
Tuck, Raphael





NOES


Agnew, Commander Sir Peter
Cooper, A. E.
Grimond, Rt. Hn. J.


Alison, Michael (Barkston Ash)
Cooper-Key, Sir Neill
Gurden, Harold


Allan, Robert (Paddington, S.)
Cordie, John
Hall, John (Wycombe)


Allason, James (Hemel Hempstead)
Corfield, F. V.
Hall-Davis, A. G. F.


Anstruther-Gray, Rt. Hn. Sir W.
Costain, A. P.
Hamilton, Marquess of (Fermanagh)


Astor, John
Courtney, Cdr. Anthony
Hamilton, M. (Salisbury)


Awdry, Daniel
Craddock, Sir Beresford (Spelthorne)
Harris, Frederic (Croydon, N.W.)


Baker, W. H. K.
Crawley, Aidan
Harris, Reader (Heston)


Balniel, Lord
Crosthwaite-Eyre, Col. Sir Oliver
Harrison, Brian (Maidon)


Barber, Rt. Hn. Anthony
Crowder, F. P.
Harrison, Col. Sir Harwood (Eye)


Barlow, Sir John
Cunningham, Sir Knox
Harvey, Sir Arthur Vere (Macclesf'd)


Batsford, Brian
Curran, Charles
Harvey, John (Walthamstow, E.)


Bennett, Sir Frederic (Torquay)
Currie, G. B. H.
Harvie Anderson, Miss


Bennett, Dr. Reginald (Gos &amp; Fhm)
Dalkeith, Earl of
Hastings, Stephen


Berry, Hn. Anthony
Dance, James
Hawkins, Paul


Bessell, Peter
Davies, Dr. Wyndham (Perry Barr)
Hay, John


Biffen, John
Dean, Paul
Heald, Rt. Hn. Sir Lionel


Biggs-Davison, John
Deedes, Rt. Hn. W. F.
Heath, Rt. Hn. Edward


Bingham, R. M.
Digby, Simon Wingfield
Hendry, Forbes


Birch, Rt. Hn. Nigel
Doughty, Charles
Higgins, Terence L.


Black, Sir Cyril
Douglas-Home, Rt. Hn. Sir Alec
Hiley, Joseph


Blaker, Peter
Drayson, G. B.
Hill, J. E. B. (S. Norfolk)


Bossom, Hn. Clive
du Cann, Rt. Hn. Edward
Hirst, Geoffrey


Bowen, Roderic (Cardigan)
Eden, Sir John
Hobson, Rt. Hn. Sir John


Box, Donald
Elliot, Capt. Walter (Carshalton)
Hogg, Rt. Hn. Quintin


Boyd-Carpenter, Rt. Hn. J.
Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Hopkins, Alan


Boyle, Rt. Hn. Sir Edward
Eyre, Reginald
Hordern, Peter


Braine, Bernard
Farr, John
Hornby, Richard


Brewis, John
Fell, Anthony
Howard, Hn. G. R. (St. Ives)


Brinton, Sir Tatton
Fisher, Nigel
Howe, Geoffrey (Bebington)


Bromley-Davenport,Lt.-Col.Sir Walter
Fletcher-Cooke, Charles (Darwen)
Hunt, John (Bromley)


Brooke, Rt. Hn. Henry
Fletcher-Cooke, Sir John (S'pton)
Iremonger, T. L.


Brown, Sir Edward (Bath)
Foster, Sir John
Irvine, Bryant Godman (Rye)


Bryan, Paul
Galbraith, Hn. T. G. D.
Jenkin, Patrick (Woodford)


Buchanan-Smith, Alick
Gammans, Lady
Jennings, J. C.


Buck, Antony
Gardner, Edward
Johnson Smith, G. (East Grinstead)


Bullus, Sir Eric
Gibson-Watt, David
Johnston, Russell (Inverness)


Burden, F. A.
Giles, Rear-Admiral Morgan
Jones, Arthur (Northants, S.)


Butcher, Sir Herbert
Gilmour, Ian (Norfolk, Central)
Jopling, Michael


Buxton, Ronald
Gilmour, Sir John (East Fife)
Joseph, Rt. Hn. Sir Keith


Campbell, Gordon
Glover, Sir Douglas
Kaberry, Sir Donald


Carlisle, Mark
Glyn, Sir Richard
Kerby, Capt. Henry


Carr, Rt. Hn. Robert
Goodhart, Philip
Kerr, Sir Hamilton (Cambridge)


Cary, Sir Robert
Goodhew, Victor
Kilfedder, James A.


Chataway, Christopher
Gower, Raymond
Kimball, Marcus


Chichester-Clarn, R.
Grant, Anthony
King, Evelyn (Dorset, S.)


Clark, Henry (Antrim, N.)
Grant-Ferris, R.
Kirk, Peter


Clark, William (Nottingham, S.)
Gresham Cooke, R.
Lagden, Godfrey


Clarke, Brig. Terence (Portsmth, W.)
Grieve, Percy
Lambton, Viscount


Cole, Norman
Griffiths, Eldon (Bury St. Edmunds)
Lancaster, Col. C. G.


Cooke, Robert
Griffiths, Peter (Smethwick)
Langford-Holt, Sir John







Lewis, Kenneth (Rutland)
Orr. Capt. L. P. S.
Talbot, John E.


Litchfield, Capt. John
Orr-Ewing, Sir Ian
Taylor, Sir Charles (Eastbourne)


Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Osborn, John (Hallam)
Taylor, Edward M, (G'gow,Cathcart)


Lloyd, Ian (P'tsm'th, Langstone)
Osborne, Sir Cyril (Louth)
Taylor, Frank (Moss Side)


Longbottom, Charles
Page, John (Harrow, W.)
Teeling, Sir William


Longden, Gilbert
Page, R. Graham (Crosby)
Temple, John M.


Loveys, Walter H.
Pearson, Sir Frank (Clitheroe)
Thatcher, Mrs. Margaret


Lubbock, Eric
Percival, Ian
Thomas, Sir Leslie (Canterbury)


Lucas, Sir Jocelyn
Peyton, John
Thomas, Rt. Hn. Peter (Conway)


McAdden, Sir Stephen
Pickthorn, Rt. Hn. Sir Kenneth
Thompson, Sir Richard (Croydon,S.)


MacArthur, Ian
Pike, Miss Mervyn
Thorneycroft, Rt. Hn. Peter


Mackenzie, Alasdair (Ross&amp;Crom'ty)
Pitt, Dame Edith
Thorpe, Jeremy


Maclean, Sir Fitzroy
Powell, Rt. Hn. J. Enoch
Tiley, Arthur (Bradford, W.)


McMaster, Stanley
Price, David (Eastleigh)
Tilney, John (Wavertree)


McNair-Wilson, Patrick
Prior, J. M. L.
Turton, Rt. Hn. R. H.


Maginnis, John E.
Quennell, Miss J. M.
Tweedsmuir, Lady


Maitland, Sir John
Ramsden, Rt. Hn. James
van Straubenzee, W. R.


Marples, Rt. Hn. Ernest
Redmayne, Rt. Hn. Sir Martin
Vaughan-Morgan, Rt. Hn. Sir John


Marten, Neil
Rees-Davies, W. R.
Vickers, Dame Joan


Maude, Angus
Renton, Rt. Hn. Sir David
Walder, David (High Peak)


Mawby, Ray
Ridsdale, Julian
Walker, Peter (Worcester)


Maxwell-Hyslop, R. J.
Roberts, Sir Peter (Heeley)
Walker-Smith, Rt. Hn. Sir Derek


Maydon, Lt.-Cmdr. S. L. C.
Robson Brown, Sir William
Walters, Dennis


Meyer, Sir Anthony
Rodgers, Sir John (Sevenoaks)
Ward, Dame Irene


Mills, Peter (Torrington)
Roots, William
Weatherill, Bernard


Mills, Stratton (Belfast, N.)
Royle, Anthony
Wells, John (Maidstone)


Miscampbell, Norman
Russell, Sir Ronald
Whitelaw, William


Mitchell, David
St. John-stevas, Norman
Williams, Sir Rolf Dudley (Exeter)


Monro, Hector
Scott-Hopkins, James
Wills, Sir Gerald (Bridgwater)


More, Jasper
Sharples, Richard
Wilson, Geoffrey (Truro)


Morgan, W. G.
Shepherd, William
Wise, A. R.


Morrison, Charles (Devizes)
Sinclair, Sir George
Wolrige-Gordon, Patrick


Mott-Radclyffe, Sir Charles
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Wood, Rt. Hn. Richard


Munro-Lucas-Tooth, Sir Hugh
Smyth, Rt. Hn. Brig. Sir John
Woodhouse, Hon. Christopher


Murton, Oscar
Spearman, Sir Alexander
Woodnutt, Mark


Neave, Airey
Speir, Sir Rupert
Wylie, N. R.


Nicholls, Sir Harmar
Stainton, Keith
Younger, Hn. George


Nicholson, Sir Godfrey
Stanley, Hn. Richard



Noble, Rt. Hn. Michael
Stodart, Anthony
TELLERS FOR THE NOES:


Nugent, Rt. Hn. Sir Richard
Stoddart-Scott, Col. Sir Malcolm
Mr. McLaren and Mr. Pym.


Onslow, Cranley
Studholme, Sir Henry

Clause 46.—(COMPANIES NOT RESIDENT IN THE UNITED KINGDOM.)

Mr. Ian Lloyd: I beg to move Amendment No. 404, in page 55, line 29, after "agency", to inert:
or, being resident in a territory with the government of which no agreement under section 347 of the Income Tax Act 1952 subsists, it carries on a trade which includes operating ships between ports in the United Kingdom or between ports in the United Kingdom and other territories".

The Temporary Chairman (Mr. Thomas Steele): With this Amendment it would be convenient to take Amendment No. 405, in page 55, line 29, leave out "does so" and insert:
carries on such a trade".
Amendment No. 406, in line 34, leave out from "on" to "shall" and insert:
there such a trade as is mentioned in subsection (1) above".
and Amendment No. 407, in line 36, after "agency", insert:
or arising whether directly or indirectly from operating ships between ports of the United Kingdom or between ports of United Kingdom and other territories".

Mr. Lloyd: Yes, Mr. Steele. Those three Amendments are purely consequential, and stand or fall with this one.
I find myself in a distinctly anomalous position in moving the Amendment. One of the most notable features of the debate so far has been the preoccupation of the Committee with the effect of these new measures on two types of industry, first, manufacturing industry within the United Kingdom—as might well be expected—and, secondly, that sector of industry with overseas income arising either from investment abroad or manufacturing abroad.
I am sure that the Committee will agree that this is a legitimate pre-occupation, for the cutting edge of the Chancellor's proposals has been well and truly oiled on the hone of Socialist philosophy. This is a very different thing from Occam's razor. Occam's razor is an abstruse and philosophical uncertainty, but Callaghan's razor is a concrete and damaging reality. This reality has given an altogether new meaning, I think, to the term "a close shave". If hon. Members find very shortly that when presented with this razor the national chin is withdrawn with


some alacrity from the trembling hand of the Chancellor, I think that this should cause no surprise.
Apart from the case—there is only one—of methane tankers, which was mention by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), there has been—this is surprising—no mention whatever in the Committee of the shipping industry. Shipping, of course, has no choice of domicile, but without it, not only would there be no shipping contribution to the balance of payments, I think that it would be very difficult for other industries to make their contribution to the balance of payments. The industry has no choice of domicile except only in the most marginal sense of new companies. The investment is made locally, but it proceeds inexorably overseas and it returns in due course with a comfortable profit.
I cannot, therefore, allow the occasion to pass without emphasising that this great and vital industry, whose circumstances are well known to right hon. and hon. Gentlemen opposite, awaits with considerable interest the Chancellor's public reaction to the proposals which have been made to him both privately and publicly. I am afraid he is not here this evening.
The anomaly arises in that this Amendment seeks to serve fundamentally not shipping but, surprisingly, the Government. At present, the Government have their hands tied in the circumstances covered by the Amendment. They are tied particularly when dealing with the competitors of British shipping. These are, in general, efficient, imaginative, ruthless and without scruple in most circumstances and conditions. In dealing with these competitors, the Government's hands are tied, particularly when our competitors are able to operate in this country without registering themselves as companies.
It has long been the practice of Her Majesty's Government to include articles relating both to shipping and air companies and the profits made by both in all double taxation agreements. I understand that it is normally the Government's practice to extend the range of these agreements wherever possible. I also understand that several of these agreements have recently ended and several more are under notice of termination.

Therefore, foreign shipowners can avoid tax liability in this country by operating through agents or branches while their Governments tax our shipowners on profits, in some cases real, in some cases merely estimated and in some cases merely notional, calculated on gross rates and gross passenger earnings abroad. In some cases, I may add, these payments have to be made by a British ship, irrespective of whether or not there is a true profit, before the ship clears port.
This is a thoroughly indefensible practice with a quality of inequity which even the present Government's proposals do not exceed. But the Amendment which I propose with its consequential Amendments would at least provide Her Majesty's Government with a long spoon to use when they are supping with those who practise all the confusing subtleties of the new mancantilists, whether of the school of Balliol or of the school of Kings. The effect of the Amendment is quite simple. If it is applied—that is, if there are no double taxation agreements—we would at least gain the tax from overseas shipping companies trading here under various disguises. If it is not applied—that is, if it enables Her Majesty's Government to persuade other Governments to conclude double taxation agreements—the taxable income of British shipowners will be enlarged and it means that Her Majesty's Government will gain.
I submit that this is a case where Her Majesty's Government do not lose, but undoubtedly British shipping will benefit.

8.45 p.m.

Mr. Simon Wingfield Digby: I should like to say a few words in support of the Amendment, so ably moved by my hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd). At Question Time on Tuesday the Prime Minister was full of sympathy from the Government for the shipping industry. We now come to the first of a number of Amendments where the Government will have a chance to show whether they really are sympathetic. The shipping industry is subject these days to a great deal of competition. Some of it is fair but an increasing degree of it is unfair, with companies being subsidised in one way or another. Here we


have an example where the shipping industry is at a disadvantage as compared with some of its foreign competitors, where no double taxation agreement is in existence.
The effect of these four proposals would be to assist the Treasury when it was negotiating future double taxation agreements or renegotiating old ones. It would strengthen its hand by bringing the taxation of this country into line with that of many of our competitors who, where there is not an agreement in existence, do charge shipping profits arising from the ports of those countries. They bring them into taxation, which is something which under our present taxation rules we are not able to do. I hope, therefore, that on this first of a series of Amendments on shipping the Government will look sympathetically at the new powers that we seek to confer upon them.

Mr. Edward M. Taylor: There are a few points I should like to make. The first is that I think we are entitled to ask for special treatment for the shipping industry, and this is in effect the basis of our argument. It is appreciated that other industries may be affected, but essentially we have the shipping industry in mind in putting forward this Amendment. We are entitled to ask for this special treatment primarily because of the effect which the Corporation Tax will have on the British shipping industry. At present under the existing system some companies will gain and others will lose. While it is possible to say that in one industry some firms will benefit arid some firms will not, one thing which stands out a mile is that shipping as a whole will suffer from the new Corporation Tax.
It has been made quite clear that, whereas the average company, in an average industry, which has its dividend covered twice will not benefit or lose, on the other hand a company whose dividend is covered only once—or any figure less than twice—will suffer under this new taxation. In the shipbuilding industry the dividend cover is only just over one, and when we compare that with the average of two it is clear that shipping will suffer substantially.
Apart from that, there is one other point which the Government should bear in mind. That is the effect on the British

shipbuilding industry of credit proposals which have been brought forward recently. This is directly relevant to the Amendment because it is tied up with the Government's general attitude to shipping. Under these proposals, referred to very briefly, we have a situation where a foreign shipowner who is being helped by this Clause as it now stands, can order his ships in this country much more cheaply than can our own British shipowners. This is of great concern when we consider that last year more than 80 per cent. of all the ships built in Great Britain were built for the British industry. Quite apart from that, it is most unfortunate when we see the different policies of the Government appearing to work at cross-purposes. We are told that the whole purpose of this entire Budget is concerned with our balance of payments. Do not the Government appreciate that the—

The Temporary Chairman: Order. I think that the hon. Gentleman is going a bit wide now. We are not considering the balance of payments in this Amendment.

Mr. Taylor: That is true, but if the Amendment is not accepted our balance of payments could be adversely affected as a result of the tax on the shipping industry. However, I will not proceed with this point, except to add that last year we saved £250 million in foreign currency because of the contribution made to the economy by the industry.
As we have a great industry which is not scared to face competition from any part of the world, so long as it is fair competition, the Government have an obligation to do what they can to ensure that the shipping industry gets a fair deal. At present it is not getting a fair deal in world markets. We do not have fair trading. Tax concessions are given to some foreign shipowners, although our industry does not ask for anything but normal protection. Some of our ships trading abroad are assessed on profits allegedly earned, although they may not have made those profits. Wild assessments of profits are sometimes made and shipowners must pay tax on them. This is an abnormal situation and something must be done about it.
Only proper double taxation agreements will solve the problem, and it is


regrettable that so many countries are not prepared to make such agreements. It is essential that they are made. We do not want to enter a situation in which, like some other countries, we try to protect the industry in an abnormal way. We want to achieve a situation of equality. We believe that British shipping can stand up to fair competition but that the Government must show concern for an industry which has earned so much for this country.

Dame Irene Ward: I need not add to the details which have been given about the purpose of the Amendment. I entirely support it and everything that has been said by my hon. Friends in its favour. In my part of the country shipping has had a difficult time and there is no doubt that shipping interests will be adversely affected by the Corporation Tax, although I appreciate that we are not discussing that aspect now.
In two recent Questions I asked the Government to give sympathetic treatment to the industry and the work that is being done in the areas where shipping helps to add considerably to our invisible exports. I was delighted to hear that in regard to regional development in my constituency—and regional development must be associated with shipping as with other industries—the National Economic Planning Board is hard at work trying to find out what it can do to help the North-East Coast.
Acceptance of the Amendment would go some way towards giving that help. There are relatively few ways in which the Government can help shipping interests and the Amendment represents shipping interests through the Chamber of Shipping, an organisation which knows the difficulties faced by the industry throughout the world. The Chamber has had a very helpful reception from the appropriate Ministers when it has sought to adduce the problems which the industry faces.
Through these Amendments, the Chamber of Shipping puts forward proposals that would be of definite benefit to the industry. The Amendments constitute a challenge as to how far the sympathetic statements made by the Prime Minister, and most Ministers to whom I have addressed

Questions, are concerned with the interests of shipping, and how far those who have made them genuinely believe in them. In trying to help the shipping industry, the Government cannot avoid dealing with proposals put forward by the Chamber of Shipping itself, and there surely can be no possible objection to these Amendments.
It is extremely disappointing, and not a little surprising that matters like this, which are of national interest and not at all linked with the party political battle, were not embodied in the Bill. Perhaps part of the answer is that though the Treasury is responsible for the Finance Bill, there seems to be a lack of coordination between one Government Department and another.
I am slightly surprised, for instance, that when the Bill was being framed, the President of the Board of Trade did not see to it that it was appropriately amended to meet the desires and views of the shipping industry. It is also rather odd that the Chief Secretary did not ensure that the chairmen of his national economic planning boards saw to it that proposals of this kind were embodied in the Bill.
I suppose that the very width of this Measure, with all its tremendously controversial proposals, occupied so much of the time of senior Ministers of all kinds that they almost failed to notice what was essential to the protection and safeguarding of our shipping interests which, we must all agree, need all the support that a maritime nation can give them. I hope that the Amendments are accepted. I cannot see what objection can be taken to them, representing, as they do, the views of those in this great industry.

Mr. Stanley R. McMaster: I raised the subject of shipping in an Adjournment debate last week, and I asked the Minister to convey to his right hon. Friends in the Treasury my feeling, which I gathered, he shared, that Amendments based on proposals by the Chamber of Shipping should be carefully looked at. I was particularly pleased that on Tuesday the Prime Minister, in reply to Questions from me, and the President of the Board of Trade, said that they were prepared to pay particular attention to the needs of the shipbuilding industry.
9.0 p.m.
I shall not weary the Committee by repeating points already made. Our shipowners still sail the largest merchant fleet in the world, but they are rapidly losing this pre-eminent position as other shipowners, flying flags of convenience and benefiting from considerable tax concessions, compete for the available trade. That, and such practices as flag discrimination and flag reservation, reduce the amount of cargo available to be carried. The industry works under very narrow profit margins. If our shipowners were to fail or lose their position, the country would have to spend an estimated £250 million on carrying its cargoes in foreign vessels.
For this reason, I ask the Government to pay particular attention to the Amendment, which are a bargaining counter with countries with which we have not got double taxation agreements. For example, before our ships leave Indian ports the profit is assessed at one-sixth of the value of the outward freight arid they are taxed on that. This is iniquitous. If the Amendments were adopted, we should be in a very much better position when negotiating double taxation agreements with countries with which we have no such agreements.
The Amendments have been carefully drafted by counsel on behalf of the Chamber of Shipping. If the Government are not satisfied with the wording, but would agree to consider the matter carefully between now and Report, my hon. Friends and myself would be glad to withdraw the Amendment on that assurance.

Mr. Peter Emery: My hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd) and others have deployed a powerful case. This is the first of the debates on Corporation Tax affecting any matter overseas. I hope that the Minister will not think, because it is a small point, that we take the view that it is any less important than many of the more major points that we shall deal with later. My hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) rightly said that shipping had made a specific request to the Government that it should have special treatment. The position in regard to India, mentioned by my hon. Friend the

Member for Belfast, East (Mr. McMaster), is worse than my hon. Friend led the Committee to believe. The money has to be paid before the ship is allowed to leave.
The Amendments seek to strengthen the Government's hand in negotiating double taxation agreements. It has long been the Government's policy to seek agreements with other Governments for the avoidance of double taxation. This is particularly apposite to shipping and shipping profits. My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) said that some of these agreements were falling in. The Government need as much power to their elbow as possible in their negotiations. Therefore, although it may be said that it is unnecessary and that the Government are able to negotiate without these powers, it cannot be argued that their position will not be strengthened if they take them.
We are concerned with this rather small change because so many people are worried about the part which shipping has to play in our economy. Over the past years, the net contributions to the balance of payments have ranged from £89 million, £76 million, £72 million to £84 million. It is not the rising figure that many of us would like to see. There is no real sign of advance. Therefore, any specific action which the Government could take to help shipping as such ought to be taken. I hope that we shall have a favourable answer and that the Government will assure us that, if they cannot accept the actual wording of the Amendment, they will at least consider the matter seriously before the Report stage.

Sir Eric Fletcher: So much has been said in this debate by hon. Members opposite with which I agree that it may sound churlish if I say that there was only one observation made by the hon. Member for Reading (Mr. Peter Emery) with which I disagreed, and that was when he said, twice I think, that this was a small and somewhat unimportant matter. I regard it as a very important matter indeed, and I am personally grateful to all hon. Members who have spoken in emphasising the great importance of the contribution which the shipping industry makes to our national life. I cannot approve of the observations of the hon.


Lady the Member for Tynemouth (Dame Irene Ward) when she suggests that there is a lack of co-ordination between the Chancellor of the Exchequer and the President of the Board of Trade in their concern for the shipping industry. As the Prime Minister said earlier this week, the whole Government have very much at heart the difficulties and handicaps of the shipping industry, and we are conscious of the competition from which it suffers at the hands of foreign Governments.
It is within that context that we have to consider whether there is anything that can be done within the four corners of the Finance Bill to help the shipping industry. As has been said, some of my hon. Friends and I have had discussions with representatives of the shipping industry. We are grateful to them for the suggestions they have made on how we can help them. We are anxious in this Committee to consider how far anything on the lines of these Amendments would be of value to the shipping industry. This is the problem.
Clause 46, unlike most of the Clauses of the Bill, does not impose a charge but relieves certain companies from liability. It provides that a company not resident in the United Kingdom shall not be within the charge to Corporation Tax unless it carries on a trade in the United Kingdom, and so on. It is proposed by the Amendment that we should bring within the category of chargeable companies not merely those foreign companies which trade in the United Kingdom but also a company which
being resident in a territory with the Government of which no agreement under Section 347 of the Income Tax Act 1952 subsists carries on a trade which includes operating ships between ports in the United Kingdom or between ports in the United Kingdom and other territories".
I have given a good deal of thought to this Amendment, and I suggest that it will be no waste of time if we analyse a little further what it would do. First, it would give the Government power to tax for Corporation Tax purposes a company which is not resident here, has no branch here and does not trade here but which nevertheless operates shipping between ports in the United Kingdom and other ports, provided that there is no double taxation agreement. As hon.

Members have said, we have many double taxation agreements. I have been at pains in recent weeks to analyse some of them. They are very varied and do not follow a common pattern. Each has to be separately negotiated with the foreign country concerned. As the hon. Member for Reading observed, some are on the point of expiry. Others have expired and are being renegotiated.
As the Chancellor has said, the introduction of Corporation Tax itself makes necessary a certain amount of renegotiation of double taxation agreements because, whereas they have applied to Income Tax, Surtax and Profits Tax, the language of the agreements is not in every case appropriate for our new fiscal system incorporating Corporation Tax. There is, therefore, a good deal of detailed diplomatic work to be done on these double taxation agreements. We shall endeavour to secure the most favourable terms for our country in those negotiations.
The Amendment would apply only in the case of those countries with which we have no double taxation agreement. Therefore, it would have only a limited application. I must also consider precisely what application it would have. It would give us power to tax foreign shipping companies which hitherto we have not taxed. It is said in support of the Amendment that it would strengthen our arm in those negotiations. The case of India was cited by the hon. Member for Belfast, East (Mr. McMaster), who pointed out, I think quite correctly, that British shipping companies trading to India are taxed merely because they deliver passengers or cargo at the ports, and he said that that was iniquitous.
I ask myself, is it really suggested that we should take power to reciprocate by doing something which would be something equally iniquitous? Is the suggestion that we should meet iniquity with iniquity? Or is the suggestion merely that we should take power to meet iniquity with iniquity without intending to repay iniquity with iniquity? Hitherto it has not been part of our policy to condemn what some other country does as iniquitous and then say, "We will do the same by way of retaliation unless they mend their ways". If that is the argument hon. Members will see


that it has certain drawbacks. But that may not be unfavourable to the argument. I am sympathetic in this matter and anxious to see how far it is possible, consistent with our ordinary principles of legislation, that we can go in meeting the problems of the shipping industry.
9.15 p.m.
In my study of the subject I have had to examine such other difficulties as present themselves. I do not think that any Treasury Minister would be averse from getting more revenue for the country if he could. Suppose we did have this power in this Clause. Suppose we said that although we had the power we would use it for its deterrent effect only and we were not ever going to do anything which anybody could describe as iniquitous whether done by ourselves or another country. I am bound to tell the Committee that quite a number of other practical problems will arise.
For example, if we are going to tax a shipping company which puts cargo into a United Kingdom port, how shall we assess the amount of the profits of that company which should be taxed to Corporation Tax because it puts cargo into a United Kingdom port? That is one point. Secondly, whom are we going to assess to the tax? Thirdly, how shall we then enforce it if we find the right person to assess and the right formula for calculating the amount of the assessment?
I mention these difficulties only to indicate to the hon. Members who have spoken in support of the Amendment that, sympathetic though one is to their problems, this is not exactly as simple as some hon. Members at first sight may have thought it to be. Having pointed out the problems one would then have to consider how far it would be appropriate, if we are to modify our tax—if we are going to modify at all—that we should modify the principles on which hitherto we have taxed foreign countries, that is, on the basis of trading here. How far is it proper to modify those principles in respect of shipping companies alone? Or, if we are going to make a modification, should we extend it to other industries as well?
I hope that I have said enough to express my sympathy with the spirit in which the Amendment has been moved

and to indicate some of the practical difficulties which have occurred to me in seeing whether it could be made. I should like to conclude by saying that I hope that the Amendment will be withdrawn and the others not pursued, and I will give this assurance to the Committee, that, in the renegotiation of all the double taxation agreements, the Government will certainly have regard to the very important interests of the shipping industry. Secondly, with the Board of Inland Revenue, I will continue consideration of how far, if at all, any extension of its right to tax foreign companies is possible or not. I can give no assurance that that study, which must inevitably be somewhat detailed, could possibly be completed in time for any Amendments to be put down to this year's Finance Bill. I regard the matter as one of considerable importance, and I think that the Committee will realise from what I have said that it will engage the close attention of Her Majesty's Ministers.

Mr. Wingfield Digby: Would the hon. Gentleman make it plain to the Committee that he is giving an absolute assurance that in every future double taxation agreement there will be a specific article on shipping profits?

Sir Eric Fletcher: I am afraid that I am not sufficiently versed in the terms of the double taxation agreements to give any such assurance, because I have not studied them sufficiently, but my right hon. Friend will have heard what has been said in this Committee, and I repeat the assurance that the interests of the shipping industry will be borne in mind in the consideraton of double taxation agreements.

Mr. Peter Emery: The Committee will be grateful for the way in which the Minister without Portfolio has dealt with this problem. However, his general sympathy with shipping interests would go very much better with hon. Members on this side of the Committee—I say this more in sorrow and anguish than in any forceful political spirit—and it would have been appropriate, as this is the first Amendment dealing with shipping; and there are only two on the whole Bill—if the Minister of State, Board of Trade, who has specific responsibility for shipping matters, could have been present during this debate. I know that it may not be


his responsibility to get the Finance Bill through, but he has a specific responsibility for shipping. It would have been very much better if he had had the general good sense and interest to attend the debate.
May I make two points? We realise that there are difficulties. There are always difficulties in negotiating double taxation agreements. There are bound to be problems about how the tax can be calculated. The Indians have a very able way of collecting it. They do not let the ship leave until the tax has been paid. Let me present that as a possible way in which Her Majesty's Government could act if they felt that it was necessary.
I did not take very kindly to the tautological criticism of the use of iniquities. In my view, all taxation is iniquitous and I do not think that we need worry very much about that. However, we should study closely what the Minister has said and perhaps let those people who are particularly concerned with shipping interests look at the matter.
If my hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd) saw fit to withdraw the Amendment, we might well want to introduce a proposal on Report if the Government are not able to take action themselves. However, I hope very much that the Government will take action before the Report stage.

Mr. Ian Lloyd: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause stand part of the Bill.

Mr. Peter Emery: There is one quite serious point about the Clause on which we must probe the Government. As the Minister without Portfolio said, this is a somewhat unusual Clause in a Finance Bill in that it starts by exempting certain businesses from taxation. The Clause refers to non-resident companies operating throughout branches in the United Kingdom and merely puts these branches on the same footing as United Kingdom companies as regards taxation on the income arising in the United Kingdom, whether it be trading or invesment income.
The investment income received by these branches under deduction of

United Kingdom Income Tax will form part of their normal profits on which the company is liable for Corporation Tax. The Income Tax will be set off against the Corporation Tax liability, but the repayment will not be made until the Corporation Tax liability has been established.
The Clause attempts to make certain that foreign overseas companies are set up on approximately the same footing as one would have expected, whatever their nationality. There is an anomaly concerning Income Tax on the distribution of the profits. The Chancellor has been keen to cure manipulation, but the way to manipulation seems to be left wide open.
What the Clause appears to do is to encourage foreign corporations or companies to stop operating as foreign companies or firms in this country, to dispose of those companies and to begin operating as a branch or agency. Corporation Tax will still be chargeable, but they will then be able to transfer their normal earnings without having to pay the withholding tax which would have been necessary on an ordinary British subsidiary or company if it tried to distribute. There are two damaging points about this. If that is the case, I wonder how much taxation may be lost in this manner.
Yesterday, my right hon. Friend the Member for Hampstead (Mr. Brooke) asked two specific questions of the Chief Secretary when he said:
I cannot tell—nobody but the Inland Revenue can tell—what will be the loss of revenue to the United Kingdom Exchequer if every foreign-owned company in this country sets about making this change. Will it be £15 million, £20 million, or £25 million?"—[OFFICIAL REPORT, 2nd June, 1965; Vol. 713, c. 1793.]
My right hon. Friend did not get an answer. The whole point was slurred over. What estimate has been made? If the figure is of that proportion the Committee should know.
Many foreign companies have been building up and attempting to integrate here, to use our labour and to do everything to contribute to the economy. Over the years, I have been associated with one of them. I also know that these companies use Great Britain as their headquarters for their operations in


Europe. Surely we want to encourage them to co this.
If, because of Corporation Tax, we make it more worth their while to stop operating those companies and to go over to agencies or branches—and many of them will have other subsidiary companies elsewhere in Europe—it would be nonsense to stop this build-up, which can benefit the economy, so that these firms de not have to pay their withholding tax because they operate as a foreign branch or agency.
This is a serious point. We on this side thought it was something that obviously had been overlooked. That was why we did not put down a specific Amendment. We thought it worth while to ask the Minister to deal with the matter on the Question, "That the Clause stand part of the Bill", because it is of such importance. Unless we get specific assurances, we may have to raise the matter by Amendment on Report. Obviously, the last thing that either side wants is a greater loss of tax and, at the same time, to see companies being encouraged not to stay as companies in this country, to operate not as a whole but through agencies or branches. That is my specific question which I should like the Minister without Portfolio to clear up.

Mr. John Tilney: I support my hon. Friend the Member for Reading (Mr. Peter Emery). I come from a city which has benefited greatly of recent years by tremendous capital investment by a foreign-owned company—namely, Ford—which has made a tremendous contribution to relieving the unemployment situation on Merseyside.
I am worried that the withholding tax is so high that we will not get the capital investment that we still want from foreign investors from overseas. This big build up of other people's capital in this country has done tremendous good overall. I hope that when the Minister replies, he can give an idea of what will be the level of the withholding tax in due course and tell us what are the Government's intentions.

9.30 p.m.

Sir Eric Fletcher: The hon. Member for Reading (Mr. Peter Emery) and the

hon. Member for Liverpool, Wavertree (Mr. Tilney) were quite right to raise these questions and I will do my best to answer them before we part with the Clause.
I am sorry that my hon. Friend the Chief Secretary did not answer the question put by the right hon. Member for Hampstead (Mr. Brooke) in the debate yesterday, when the right hon. Gentleman asked what would be
the loss of revenue to the United Kingdom Exchequer if every foreign-owned company in this country sets about making this change."—[OFFICIAL REPORT, 2nd June, 1965; Vol. 713, c. 1793.]
The right hon. Gentleman asked whether the loss of revenue would be £15 million, £20 million, or £25 million. It was a hypothetical question and it was not answered because, with so many incalculables, it is quite impossible to make an estimate of the loss.
The sum and substance in reply to the questions of the hon. Member for Reading are as follows. If we change over for corporations from a combination of Profits Tax and Income Tax to a Corporation Tax basis, what we are basically doing in the Clause is to provide that the principles on which non-resident companies should be subject to United Kingdom tax should be the same principles as have hitherto applied: that is to say, companies which trade in this country either through a branch or through an agency, and no other non-resident companies.
That is why what we have done is to incorporate bodily by subsection (4) the provisions of Part XVI of the Income Tax Act, 1952, with which hon. Members are familiar.
My information is that this change from a combination of Profits Tax and Income Tax to Corporation Tax will have no adverse effect on the willingness and desire of foreign companies to invest in this country. I suppose that it is equally true that any foreign company having to make a decision whether to open a branch or an agency here or on the Continent will weigh up, as it is entitled to do, the fiscal advantages of one course or the other. That may or may not be called a manipulation. Every non-resident company is entitled to weigh up the relevant advantages of where or whether it should open


a branch or a subsidiary. My information and belief from the best study which I have been able to make is that the switch from Profits Tax and Income Tax to Corporation Tax will not have any deleterious effect in that respect.
What is far more important—and this answers the question about the weight of the withholding tax—the taxation of nonresident companies generally will be dealt with primarily not by the provisions of Clause 46, but by the provisions of the double taxation agreements which I mentioned earlier and which are being renegotiated, where necessary. That will be the governing factor and it is impossible at this stage to be more precise than to emphasise that it is double taxation agreements which will govern the relative taxation liabilities as between British companies trading abroad or operating abroad and foreign companies operating here.

Mr. Peter Emery: If there is no double taxation agreement, and one has a branch which has paid its 40 per cent. Corporation Tax, it would then be able to transfer the remaining distribution. To take a quite simple calculation, a branch in this country with £10,000 would have 40 per cent. Corporation Tax and so be left with £6,000, and would then have to pay ordinary Income Tax, so that it would be left with approximately £3,300. A branch of a foreign company would pay Corporation Tax and so be left with £6,000, but no withholding tax, and would then be able to transfer £6,000. It is as simple as that. I am not dealing with double taxation. If that is the case, the Minister will appreciate our concern.
This is not a matter with which we want to make great play, but we ask him carefully to consider it between now and Report.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 47.—(BASIS OF, AND PERIODS FOR, ASSESSMENT.)

Mr. Patrick Jenkin: I beg to move, Amendment No. 628, in page 57, line 45, at the end to add:
(8) Where a company is a subsidiary of another company which is resident in the United Kingdom (hereafter in this section referred to

as "the principal company") the principal company may, by notice in writing given to the Commissioners of Inland Revenue, before the expiration of any accounting period of the subsidiary or within two months thereafter require that the provisions of subsection (9) of this section shall apply to that subsidiary as respects that period and all subsequent accounting periods throughout which it continues to be a subsidiary of the principal company.
(9) Where such a notice is given the profits or losses in any accounting period to which the notice relates from the trade or business carried on by the subsidiary shall be treated, for the purposes of the Corporation Tax, as if they were profits or losses arising in the corresponding accounting period from the trade or business carried on by the principal company.

The Chairman: With this we can take Amendment No. 621, in Clause 50, page 61, line 42, at end insert:
(9) (a) Where a company resident in the United Kingdom is a subsidiary of another company which is so resident and which carries on the same trade or business as the first-mentioned company (hereafter in this section referred to as "the principal company ") the principal company may, by notice in writing given to the Board before the expiration of any accounting period of the subsidiary or within six months thereafter or such longer period as the Board may in any case allow, require that the provisions of paragraph (b) of this subsection shall apply to the subsidiary as respects that period and all subsequent accounting periods throughout which it continues to be a subsidiary of the principal company.
(b) Where such a notice is given, the profits or losses arising in any accounting period to which the notice relates from the trade or business carried on by the subsidiary shall be treated, for the purpose of computing the corporation tax chargeable in that period, as if they were profits or losses arising in the corresponding accounting period from the trade or business carried on by the principal company.
(c) For the purpose of this subsection—

(i) a company shall be deemed to be a subsidiary of another company if and so long as not less than ninety-five per cent. of its ordinary share capital is owned by that other company, whether directly or through another company or other companies, or partly directly and partly through another company or other companies, and the amount of ordinary share capital of one company owned by a second company through another company or other companies, or partly directly and partly through another company or other companies, shall be determined in accordance with the provisions of Part I of Schedule (Provisions relating to Subsidiary Companies) to this Act:
(ii) an accounting period of a subsidiary shall be deemed to correspond to such accounting period of the principal company as the Board may determine.



(d) In this section and Part I of the said Schedule references to ownership shall be construed as references to beneficial ownership, and the expression "ordinary share capital", in relation to a company, means all the issued share capital (by whatever name called) of the cornpany, other than capital the holders whereof have a right to a dividend at a fixed rate or a rate fluctuating in accordance with the rate of corporation tax for the time being in force but have no other right to share in the profits of the company.
(e) The provisions of paragraph (a) of this subsection relating to the giving of a notice by a principal company as respects a subsidiary shall have effect subject to the provisions of Part II of the said Schedule.
and Amendment No. 620:

SCHEDULE

PROVISIONS RELATING TO SUBSIDIARY COMPANIES

PART I

PROVISIONS FOR DETERMINING AMOUNT OF CAPITAL HELD THROUGH OTHER COMPANIES

1. Where, in the case of a number of companies, the first directly owns ordinary share capital of the second and the second directly owns ordinary share capital of the third, then, for the purposes of this Schedule, the first shall he deemed to own ordinary share capital of the third through the second, and, if the third directly owns ordinary share capital of a fourth, the first shall be deemed to own ordinary share capital of the fourth through the second and third, and the second shall be deemed to own ordinary share capital of the fourth through the third and so on.

2. In this Part of this Schedule—

(a) any number of companies of which the first directly owns ordinary share capital of the next and the next directly owns ordinary share capital of the next but one and so on, and, if they are more than three, any three or more of them, are referred to as "a series";
(b) in any series—

(i) that company which owns ordinary share capital of another through the remainder is referred to as "the first owner";
(ii) that other company the ordinary share capital of which is so owned is referred to as "the last owned company";
(iii) the remainder, if one only, is referred to as an "intermediary" and, if more than one, referred to as "a chain of intermediaries";

(c) a company in a series which directly owns ordinary share capital of another company it the series is referred to as an "owner";
(d) any two companies in a series of which one owns ordinary share capital of the other directly, and not through one or more of the other companies in the series, are referred to as being directly related to one another.

3. Where every owner in a series owns the whole of the ordinary share capital of the company to which it is directly related, the first owner shall be deemed to own through the intermediary or chain of intermediaries the whole of the ordinary share capital of the last owned company.

4. Where one of the owners in a series owns a fraction of the ordinary share capital of the company to which it is directly related, and every other owner in the series owns the whole of the ordinary share capital of the company to which it is directly related, the first owner shall be deemed to own that fraction of the ordinary share capital of the last owned company through the intermediary or chain of intermediaries.

5. Where—

(a) each of two or more of the owners in a series owns a fraction, and every other owner in the series owns the whole, of the ordinary share capital of the company to which it is directly related; or
(b)every owner in a series owns a fraction of the ordinary share capital of the company to which it is directly related;

the first owner shall be deemed to own through the intermediary or chain of intermediaries such fraction of the ordinary share capital of the last owned company as results from the multiplication of those fractions.

6. Where the first owner in any series owns a fraction of the ordinary share capital of the last owned company in that series through the intermediary or chain of intermediaries in that series, and also owns another fraction or other fractions of the ordinary share capital of the last owned company, either—

(a) directly; or
(b) through an intermediary or intermediaries which is not a member or are not members of that series; or
(c) through a chain or chains of intermediaries of which one or some or all are not members of that series; or
(d) in a case where the series consists of more than three companies, through an intermediary or intermediaries which is a member or are members of the series, or through a chain or chains of intermediaries consisting of some but not all of the companies of which the chain of intermediaries in the series consists;

then, for the purpose of ascertaining the amount of the ordinary share capital of the last owned company owned by the first owner, all those fractions shall be aggregated and the first owner shall he deemed to own the sum of those fractions.

PART II

PROVISIONS AS RESPECTS NOTICES

7. No principal company, being itself a subsidiary of another principal company, may give a notice as respects a subsidiary of itself, it and so long as a notice previously given as respects that principal company by that other principal company is in force.

8. Subject to the provisions of the next following paragraph, no principal company may give a notice as respects a subsidiary—

(a) if and so long as a notice previously given as respects that subsidiary by another principal company is in force; or
(b) if and so long as a notice previously given by that subsidiary as respects a subsidiary of itself is in force.

9. Notwithstanding anything in the last foregoing paragraph, where a notice previously given by a principal company (hereafter referred to as the "first subsidiary") as respects a subsidiary (hereafter referred to as the "second subsidiary") is in force, and both the first subsidiary and the second subsidiary are subsidiaries of another principal company (hereafter referred to as the "first principal company"), the first principal company may give a notice as respects both the first subsidiary and the second subsidiary, but not as respects one or the other alone:

Provided that, where a notice previously given by the first subsidiary as respects one or more other subsidiaries besides the second subsidiary is in force, the first principal company may not give a notice under the paragraph unless—

(a) that other subsidiary or all those other subsidiaries are subsidiaries of the first principal company; and
(b) the first principal company gives a notice as respects that other subsidiary or all those other subsidiaries as well as the first and second subsidiaries.

10. Where a notice is duly given by the first principal company under the last foregoing paragraph, the notice previously given by the first subsidiary as respects the second subsidiary and any other subsidiary shall cease to be in force.

11. Where a notice is given simultaneously by two or more companies the notice given by such one of them as may be agreed upon between them or, in default of agreement, may be determined by the Board, shall be treated for the purpose of this Part of this Schedule as having been given before the other notice or notices.

12. For the purposes of this Part of this Schedule, the expression "notice" means a notice under Section 50(9)(a) of this Act and a notice duly given under that paragraph by a principal company as respects a subsidiary shall, subject to paragraph 10 of this Schedule be deemed to continue in force so long as the subsidiary continues to be a subsidiary of the principal company.

Mr. Jenkin: I hope that this will be a case of third time lucky. I say that with good reason, because it is quite obvious from the reply which he gave to my first Amendment this afternoon that the Chief Secretary is firmly under the impression that there is already grouping for Corporation Tax purposes. If he studies the OFFICIAL REPORT tomorrow he will

see that I use those words with some justification.
The purpose of the Amendment is to import into the Corporation Tax system the same provisions for grouping which have applied to Profits Tax since 1937. I should make it clear that we are referring to grouping for the purpose of liability to Corporation Tax and that it is not the same point which we were discussing on Clauses 43 and 44 when we considered grouping for the purpose of the withholding tax on distributions.
The Amendment is a direct adaptation of the relevant Section of the Finance Act, 1937, Section 22. I say clearly and freely at the outset that I entirely recognise that the Amendment may not be in a form which the Government can accept and may need many conscquential Amendments. It may not even be suitable as a basic provision to provide for grouping for Corporation Tax purposes. If the hon. Gentleman on behalf of the Government would give an undertaking that this form of grouping could be introduced into the Corporation Tax system, I should be perfectly happy to withdraw the Amendment.
As the Bill is drafted—and I am conscious that I may be dispelling misconceptions in the hon. Gentleman's mind—where there is a group of companies, parent and subsidiaries, each company is to be separately assessed and separately charged for Corporation Tax purposes. The only point at which their existence as a group is relevant to determine their liability for tax is in the provision that we have discussed under Clause 44 for giving notice of election for the payment of dividends gross.
This appears to me to ignore a fundamental reality about such groups of companies, namely, that these groups are under a common control, that they follow a unified policy, that they are often administered as a single entity, and that the existence of separate companies within the group is for reasons of convenience, to allow the holding of property in different parts of the country, to allow specific trades to have their own separate accounts made up, and so on. It has hitherto always been a feature of our tax legislation that we recognised this basic fact about the grouping of companies, that where they are all under a


common control they ought to be treated as a single basis.
Under Profits Tax, on giving notice of election under section 22 of the Finance Act, 1937, it is possible to ensure that the profits of all the companies are charged as one, and it is possible to make sure that losses on one are set off against profits on the other, and so on. There are all sorts of reasons why this can be of great convenience, and if it is ignored, if the tax system does not take account of this fact about the organisation of groups of companies, considerable hardship will result.
I should like to give one example of the sort of hardship that can result as a consequence of the change in the pattern of taxation which is being brought about by Part IV of the Bill. Let us imagine that there is a parent company which does not carry on a trade, but which merely holds shares in a subsidiary. Let us suppose that the subsidiary is carrying on a trade with which it makes a profit, but the parent company, which is the company in which the public are interested, has to pay a substantial amount of debenture interest.
We have not come to Clause 48, but the hon. Gentleman will be aware that under that Clause debenture interest and other annual payments are able to be set off as deductions against the profits of an enterprise before arriving at the profits which are chargeable to Corporation Tax. If there is a case where it is the subsidiary company which is carrying on the trade which gives rise to profits which are chargeable to Corporation Tax, and the parent company is the company which has to pay the debenture interest, if there is no grouping provision, the result is that the subsidiary pays its Corporation Tax without making any deduction for the debenture interest because that is not chargeable to itself but to its parent. The result is that if a dividend is paid from a subsidiary to the parent it is out of the net dividend that the whole debenture interest has to be paid.
As I understand the Bill, there is no provision for setting off the tax that has to be deducted, withheld, and paid over on the debenture interest from the tax which is being charged by deduction when the dividend is declared. This

flows directly from the absence of any comparable group procedure for Corporation Tax as has applied since 1937 for Profits Tax.
It is not only in cases of debenture interest that this sort of thing arises. It may be the case that a parent company has management expenses, but it has no other income chargeable to Corporation Tax against which its management expenses can be set, because the only income of the group of companies, on the facts as I have stated them, is from the subsidiary, and that subsidiary can make no deduction from its profits, before charging them to Corporation Tax, for the expenses which the parent company has to bear.
9.45 p.m.
The Minister without Portfolio is looking extremely puzzled. I hope that I am making myself clear. These points are not easy to explain. I do not deal with these matters every day of the week, but I believe that I have put forward a sound argument and I hope that I have made it clear. I should also point out that I have taken an example where the subsidiary company has trading profits and the parent has charges, such as debenture interest or management expenses. It could happen the other way round. It could be the subsidiary company which has tc pay interest—perhaps mortgage interest on property it owns—which does not make any profits which are chargeable to Profits Tax, whereas the parent company has carried on trade which is taxable, and yet cannot set off the charges paid by its subsidiary.
The purpose of the Amendment is to set this anomaly right. I gained the impression from something which the Minister without Portfolio said earlier that he thought that this provision was already contained in this part of the Bill. I assure him that it is not. The purpose of the Amendment is to bring into this part of the Bill the provision for grouping profits and losses of groups of companies so that they may be charged Corporation Tax together, as one entity.
The Chief Secretary will confirm that the grouping provisions have worked well and smoothly so far in connection with Profits Tax. They have given rise to no difficulties so far as I am aware, although they have been amended from time to


time. They have not led to any avoidance of taxation. On the other hand, they have allowed the taxation of groups of companies fairly to reflect the net position of the whole group, so that losses in one company can be set off against profits in another, and all the various other adjustments to which I have referred can be made.
It may be that the Amendment is not of itself sufficient to achieve what we want. I have great interest in Amendment No. 621, because it is a much more sophisticated Amendment, which carries the matter a good deal further, and goes into much greater detail. I bow in amazement to the skill and draftsmanship which my hon. Friend the Member for the City of Chester (Mr. Temple) and my other, hon. Friends have brought to the task.
It will be apparent to the Committee that there are some differences of substance between my Amendment and that of my hon. Friend. Particularly, his Amendment is confined to cases where the parent and the subsidiary are carrying on the same trade, and also where the parent company holds 95 per cent. of the shares in the subsidiary. My Amendment follows exactly the pattern in respect of Profits Tax, where these restrictions do not apply. There may be some reason why the Profits Tax system cannot be imported into the Corporation Tax procedure, but I cannot see what it is.
There may be some exaggerated fears like those which have been displayed already on the other side of the Committee about the possibilities of avoidance and it may be that the Amendment of my hon. Friend the Member for the City of Chester—

The Chairman: Order. I hope that the hon. Member will not be tempted to discuss the Amendment of his hon. Friend to Clause 50.

Mr. Jenkin: I was merely mentioning the Amendment as I understand that it is being taken with this one.

The Chairman: I am so sorry. My apologies.

Mr. Jenkin: If the principle of grouping is accepted, as I sincerely hope it

will be, as it is a very reasonable principle, I should be happy to withdraw my Amendment in favour of that of my hon. Friend, or we may both be persuaded to withdraw our Amendments in the hope that the Government will bring forward a new and comprehensive provision to introduce grouping into the Corporation Tax.
It is a matter of natural justice that groups of companies which are under a common management and which are run as single entities should be allowed to treat themselves, for taxation purposes, as though they were a single entity and that they should not be penalised for adopting—for good reasons of convenience—the pattern of putting their operations into separate companies. This is sometimes done for management purposes, so that a single manager can be in charge of a single company and can make up his own mind, with the result that he can say, at the end of the day, exactly what his results are.
This is done for perfectly sound technical management reasons. It is unfortunate that the introduction of this Corporation Tax, in leaving—as it does so far—any provision for grouping of these companies together, could penalise companies which adopt that practice. It is in hopes that the strength of this case will have been borne in upon the Government that I move the Amendment.

The Chairman: With this Amendment, we are taking, as I have just been reminded, Amendments Nos. 621 and 620.

Mr. Temple: My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) began by saying that he did not deal with these matters every day of the week. After listening to him for a while, I can congratulate him on having lost his amateur status a long time ago.
I was a little disappointed that you stopped him, Dr. King, a little short of explaining my Amendments, which he described as being more sophisticated than his own. This would have saved me a good deal of time. They are slightly more tightly drawn than those which he has been explaining to the Committee. I should like to congratulate my hon. Friend on this wonderful exposition of


a matter which is apparently puzzling some hon. Members. This is the second time which I have spoken during the course of this Committee stage when speeches from this side of the Committee which have been most extremely well explained, have got the Treasury Bench extremely puzzled.
I should like to explain that there are certain differences in the Amendments which stand in my name and those in the name of my hon. Friend. My Amendments are actually considerably longer and, in fact, incorporate what I think is the longest Schedule on the Notice Paper, but they are comparatively comprehensible in that they are all extraordinarily well-precedented in previous legislation. My hon. Friend congratulated me on the drafting. I must admit that I have lifited the entire Schedule from the 1938 Finance Act. There are certain differences and the basic one is, as my hon. Friend briefly mentioned, that my Amendment seeks to limit the scope of this matter to companies which are engaged in the same trade or business, and also limits it to subsidiary companies which are 95 per cent owned.
We have to bear in mind here the recommendations of the Millard Tucker Committee which sat after the 1937 Finance Act and my Amendments are drawn having regard to their recommendations.
My hon. Friend the Member for Wanstead and Woodford mentioned that there are very respectable precedents for seeking that a parent company should be able to have a group assessment for Corporation Tax and those precedents are contained, with regard to Profits Tax, in the 1937 and 1938 Finance Acts. The Minister without Portfolio, if he is to reply to this particular debate, indicated in a previous debate that group assessments were covered under Clause 44(3) of this Bill. I pointed out that Clause 44(3) deals entirely with dividend transfers. The Minister may seek to say that this group assessment has been made under Schedule 12, which deals with transfers within a group. The Minister may further seek to say that this question of group assessments may be dealt with under Section 20 of the Finance Act, 1953.
I have taken advice on all those points and I understand that group assessments for Corporation Tax purposes does not

actually come within the ambit of any of the three provisions to which I have referred. This is a matter of great importance for groups of companies, particularly insurance companies, who have been grouping themselves together for many purposes recently, for rationalisation and for pooling their particular types of business.
I can assure the Minister without Portfolio that there is not the slightest intention on the part of either my hon. Friend or myself, in moving these Amendments, to promote any tax avoidance whatsoever, nor is there the slightest intention that the companies concerned should pay less tax.
Our objectives are purely to simplify matters from an accounting point of view within a group of companies. Further, we hope to simplify matters from the Inland Revenue's point of view, because it is far easier for one inspector of taxes to deal with group assessment rather than having to deal with individual assessments for Corporation Tax purposes of many individual companies within that group. I understand that the objective of the Government is to modernise our tax system. If these Amendments are not acceded to, we shall have a much more complex and incomprehensible tax system than we have at present. My Amendments have been most carefully thought out, as my hon. Friend pointed out, and they cover all the loopholes that could have been foreseen, because they incorporate the procedure adopted in the 1938 Finance Act to stop up those loopholes which appeared in the 1937 Finance Act.
These particular procedures for Profits Tax have stood the test of time and, therefore, I think that one can recommend them for dealing with Corporation Tax in exactly the same way. Corporation Tax as I see it, is a tax of first instance in the same way as Profits Tax was a tax of first instance. Therefore, it should be dealt with in the same way. I believe that the proposals I am putting forward will be very much welcomed by all professional men, whether in the Inland Revenue or whether dealing with the complex matter of presenting group accounts for a major group of companies.
I hope that we have convinced the Minister without Portfolio that our Amendments are reasonable and that they will be in the interests of more effective


administration of company accounting. I hope very much, therefore, that they will be looked upon with great favour.

10.0 p.m.

Mr. Tilney: I support the remarks of my hon. Friend the Member for the City of Chester (Mr. Temple), who explained Amendments No. 621 and 620 with such clarity.
I have the honour to represent a Liverpool constituency. In the past, Liverpool has been a major centre of insurance, and it still is to some extent. From this great insurance business many invisible exports and much investment have accrued to the British economy. I urge the Minister without Portfolio to bear in mind that, although many insurance companies have merged in recent years, some of them have formed an association by which they put their business into a pool and from it achieved worth-while economies, particularly when dealing with underwriting risks.
I hope that the Minister will look at the Amendment favourably.

Mr. Michael Hamilton: My hon. Friends have made a modest plea, so modest that I am sure that the Minister without Portfolio will feel disposed to accept the Amendment.
With Profits Tax the parent company of a group can, if it wishes, have a group assessment. It seems only sensible that, with Corporation Tax, the same option should be available to it. My hon. Friend the Member for the City of Chester (Mr. Temple) mentioned the insurance industry—in which I should, perhaps, declare a personal interest—and in that industry many businesses pool their business centrally and at the end of the year divide the profits among the several companies.

Mr. Harold Lever: Would the hon. Gentleman explain how this group of Amendments would help businesses to pool their business in this way and fragment it between different companies overseas?

Mr. Hamilton: By separating the risk.

Mr. Lever: I should still like to know how the Amendments would help companies which pool their business with a number of others overseas, since the

Amendments are designed to cover the tax position of their own subsidiaries.

Mr. Hamilton: The Amendments are concerned with companies based within the United Kingdom. That is the purpose of them.
The insurance company of which I have personal experience had its 245th annual meeting yesterday. That is quite a long life. I mention it because inevitably when a company has been in being for some years it collects a large family of companies. That has happened in this, as in many similar cases. When a new company comes into the fold the first thought must be integration; to bring it in in every respect, the closer the better. This results in a sharing of premises, rationalisation of systems, a sharing of computer time and so on. This unification is absolutely essential to economy and successful working.
The Clause as drafted does not enable companies to operate in the most economic way possible by allowing them to be taxed as a group. For this reason, I support what my hon. Friend the Member for the City of Chester described with such clarity and I beg the Minister without Portfolio to give this matter real consideration. It is not asking for a large concession. It is a common-sense request and I hope that he will see it in that light.

Sir Eric Fletcher: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) proposed the Amendment with his usual masterly lucidity and dealt with a complicated subject in a way which made it intelligible to all hon. Members. I am afraid that he must have misunderstood something which I said in an earlier debate. I should like to disabuse him at once because I say emphatically that I did not say or ever think that group assessment for Corporation Tax purposes was a feature of the Bill. The hon. Member argues that there should be group assessment. I have listened carefully to his arguments, and those of his hon. Friends, but I think that they have overstated the case in favour of group assessment for Corporation Tax purposes.
It is not the case, according to my information—although I confess that I am probably not as well informed about


the opinion of all accountants as the hon. Member opposite—that all accountants and the Inland Revenue would welcome group assessments. The Inland Revenue feels that there are very considerable, disadvantages, and that it would be much better that the companies in a group should be separately assessed. That being so, I should indicate what are the disadvantages of group assessment.
As I have said on other occasions, we do not want to draw any analogy with what was appropriate in the case of Profits Tax and argue that the same thing should apply to Corporation Tax. It is part of the basic philosophy of this part of the Bill that we are getting rid of both Profits Tax and Income Tax for corporations, and introducing a new, separate Corporation Tax to which different principles shall apply.
These are some of the disadvantages of group treatment. First of all, it ignores the position of minority shareholders. Minority shareholders, perhaps preference shareholders, and perhaps ordinary shareholders, have an interest in the separate tax treatment of their own company, and may well feel themselves at a disadvantage under a system that automatically links up the tax treatment of their company with that of a group in which their interest is, at most, indirect. It will be appreciated that a group election would need to he permanent.
One hon. Member opposite has already referred to the observations of the Tucker Committee, so perhaps I may quote what that Committee said about group treatment. Paragraph 291 states:
It must also be borne in mind that whatever conditions might be laid down for inclusion in a group there would frequently be cases of companies coming into or leaving a group. It would also be necessary to ensure that the provisions could not be made use of for avoidance purposes.
I appreciate, of course, that the hon. Member for the City of Chester (Mr. Temple) has tried to circumvent that difficulty to which the Tucker Report drew attention.
Again, and I think that this is at least as important as any of the other arguments that can be used against group assessment, practical experience shows that group provision for Profits Tax leads to very considerable delays. Obviously,

it facilitates the collection of revenue—which, in future, will be in the form of Corporation Tax—if each separate company makes up its accounts and has its liability for Corporation Tax assessed as soon as possible, rather than having to wait till all the units in a group have completed their accounts—and one would have to wait for the slowest and most laggard—before group accounts can be prepared and Corporation Tax calculated and paid. Therefore, there is a definite Inland Revenue interest in not having group assessments.
Having said that, we think that we have met most of the principal practical points raised by hon. Members by the provisions in the Bill for subventions as between one company and another. We think that that provides a much more flexible method. I must, therefore, advise my right hon. and hon. Friends to resist the Amendment if it is pressed.

Mr. William Clark: That is a disappointing reply. The whole of the Minister's reply was based on the fact that the concession asked for would be mandatory. All we are asking is that the election should be optional. In addition to the excellent résumé given by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), may I give the Minister a simple example of group assessments. Suppose there is a subsidiary company which is a trading company. Suppose it has a holding company. There may be many trading companies, but suppose there is a holding company.
For the sake of simplicity, suppose there is one subsidiary company trading and one holding company purely taking the profits from the subsidiary. The subsidiary company with a profit of £100 pays Corporation Tax at £40. It is left with £60 which it can pass on to the holding company. The holding company may have a debenture interest or other allowable charge of, say, £25, which is paid out of the £60. It is left with £35. This means that the allowable charges which should have been allowed against Corporation Tax have been lost. Instead of paying what should be, under my formula, £30 Corporation Tax, the two companies have paid £40 Corporation Tax.
It is nothing to do with the operation of Profits Tax. I ask the Minister to reconsider this. My hon. Friend the Member for Salisbury (Mr. Michael Hamilton) brought out the point that this is especially important in the insurance world, which is not a fragmented business, as was alleged by the hon. Member for Manchester, Cheetham (Mr. Harold Lever). In the insurance world there is a group of companies. Some of them insure one type of risk. Others insure another type of risk. For the purpose of underwriting, there is a group of companies. There has always been a group assessment of those companies.
My hon. Friends are not asking for any reduction in Corporation Tax for the group. All they are asking is that, in considering the income of the group, only 40 per cent. should be paid. If the Minister would like me again to give my example, the £100 profit made by the subsidiary would be passed straight on to the holding company. The holding company will not be allowed to charge the allowable charges. If the allowable charges have been incurred by the subsidiary company, the Revenue would have got only £30. This is the burden of my hon. Friends' argument. I cannot see why the Minister should be so inflexible.
The Chief Secretary has great experience of accountancy matters. This is an accountancy as well as a fiscal point. I urge the Minister without Portfolio to reconsider this. He said that his experience in industry was that people do not like group assessments. This is not the case in the insurance world, which is very worried about this problem. If the Minister cannot give an immediate reply, would he at least undertake to reconsider this, because there cannot be any suggestion that in the imposition of Corporation Tax—forgetting its merits and demerits for the moment—there is any intention of the Government's penalising any business at all, in the sense of its being penalised more now than it was under the previous grouping arrangement or whatever it may have been.
Will the Minister give an assurance that he will at least look at it again, because there is a serious anomaly here? There will be a disadvantage to companies in a group where the allowable expenses for

Corporation Tax are incurred by company B whereas the income arises in company A.

10.15 p.m.

Mr. Harold Lever: I, too, hope that the Minister will look at it again, and I excuse myself in advance by saying that this is not in any way a matter of party politics. It is a matter of simple business sense and good tax administration. Let us take the points one by one, because this is a question of great importance for a great number of companies and for the Inland Revenue itself.
Industry prefers group treatment. Obviously, a group of companies usually likes group treatment. In any case, nobody forces them to group if they do not want to. We are asking that they may elect to be treated as a group. This is the common sense of trading. If people trade in a number of companies because it suits them to do so, especially in the insurance world, why on earth should they not be treated as one whole, as though all the business had been done by one company?
No injustice could result. What persuades me, prima facie, that no injustice to anyone could result is that precisely this arrangement has prevailed for years in relation to the Profits Tax. It is no use my hon. Friend telling me that there is no analogy with the Profits Tax. There is an analogy between grouping for Profits Tax, grouping for Income Tax and grouping for any tax related to the income for companies. True, Profits Tax was at a lower rate than the Corporation Tax will be, but, surely, we are not to suppose that grouping would have been allowed to prevail for Profits Tax for so many years unless it worked efficiently and fairly to aggregate the profits and losses of a group of companies in a practical manner, neither too much tax nor too little being charged.
Although my hon. Friend may say that there is no analogy with the Profits Tax, there is every analogy in terms of system and practicality of administration in grouping for Profits Tax which has worked perfectly well for years. Just because we happen to be changing from Profits Tax to Corporation Tax, there is no reason why we should take this


opportunity to abolish the grouping system unless there are real disadvantages in its continuance.
What are the disadvantages? First, ray hon. Friend says that it ignores the position of minority shareholders. That can be disposed of in a sentence or two. Most of these companies have not got any minority shareholders and, if they have, they would probably be prepared to consent. So the Minister should not come as a self-appointed defender of minority shareholders who, in fact, would think that they were being oppressed by his defence if he were to say, "We insist on denying you group treatment, and we are defending you, the minority shareholders, who really do not want to be defended and who, generally, speaking, do not exist".
Therefore, we can make light work of the Minister's first point about minority shareholders. I am sorry to keep saying that this is not a party point. It is purely a matter of good sense. There is a simple remedy, if the Minister is concerned riot to wreak injustice on minority shareholders. Incidentally, the Revenue seems to have worn the burden very lightly on its shoulders over the years in relation to Profits Tax because, although there may be no analogy between the two taxes, there is a direct analogy between the two systems. As I say, if minority shareholders are likely to be oppressed, they must have been oppressed for many years, though at 15 per cent. instead of 40 per cent.

Mr. Temple: May I draw attention to the fact that my Amendment actually covers 95 per cent. owned companies? The 5 per cent. is the odd shareholder who has got lost.

Mr. Lever: If my hon. Friend wants to avoid the thought of wreaking injustice on the 5 per cent., by all means let him avoid it, but let him not work a Sodom arid Gomorrah in reverse, as it were, condemning the whole city for the five villainous minority shareholders. Let him make a stipulation that the minority shareholders must consent, or even that there must be 100 per cent.
Next, almost as though it were a devastating threat to our peace of mind, he said that, if we allowed this proposal to take effect, the election must be permanent. I do not know why it must be permanent.

It was not permanent in the non-analogous Profits Tax in the past. I do not see why it should be permanent in this case. But be it so. Let the Minister stipulate, if he likes, "You must be wedded until death do you part"—and companies die only when they are liquidated. So that second reason does not seem overwhelming.
Next, my hon. Friend says that the Millard Tucker Committee—that magical name—says that there is a lot of coming and going in groups. I do not know what mysterious fear this is supposed to arouse. If there is anything in the point, do not group the companies which come and go, but group those which do not come and go. I cannot see why groups which have been maintained in more or less the same company situation for half a century or more should be penalised because other groups have members which come and go. Let this be applied only to the groups without the coming and going. There should be no difficulty here.
When all these arguments are seen to be insubstantial, in come two favourite arguments. One is avoidance. What avoidance is not specified. I must be told what conceivable avoidance there would be if there were effective grouping in a perfectly sensible system. I favour the Corporation Tax, and I suspect that it is here that my hon. Friends are going a little astray. They do not realise how good they are. They are changing from a bad system to a good system when they change to Corporation Tax. But what they are afraid of is that, under their good system, they will get the same kind of avoidances if they allow grouping. Racking my brains, I cannot see how it could happen if one grouped under a sensible Corporation Tax the profits of a group of companies or subsidiaries wholly owned. So avoidance does not frighten me. Even if it did, the Committee would be entitled to have confided to it the kind of avoidances which might occur, not merely a general assertion that some avoidance might occur with grouping.
Then again, my hon. Friend says that it would be a terrible thing because there would be a less active member of the group, a laggard member, which would deliver its accounts late and the group accounts could not be made up. The short answer to that is that separate


group accounts could be made up within a period. There are other and substantial objections to this, but if my hon. Friend is right, and I do not want him to have any anxiety about that, let him put some words into the Clause or into the Amendment to say that any laggard who delays should be penalised by losing group election. It is as simple as that.
As to subventions, it is no answer to businesses and their advisers, accountants, lawyers, directors, that they can get the result they want in a way in which they do not want to have it.
In a concluding sentence, I would say to my right hon. and hon. Friends that it would pay them and pay the Inland Revenue to increase the co-operation and mutual trust which exists between taxpayers and the Inland Revenue, and one of the ways to increase it is by conveniencing them whenever that can be done in a reasonable way. This seems to me to be an eminently reasonable one, and I urge my hon. Friend, who has been so moderate, and willing to listen to arguments on these matters, to look at this again.

Mr. Patrick Jenkin: I wonder whether I could add, to the very forceful arguments which we have had from the hon. Member for Manchester, Cheetham (Mr. Harold Lever), if, indeed, I may be so rash as to enter them, and to take again some of the points made by the Minister without Portfolio. They really do not hold water at all.
The argument that accountants do not like grouping for Profits Tax is sheer moonshine, if I may say so with respect. If the Minister has any doubt whatever I ask him to consider the remarks of his hon. Friend the Member for Heywood and Royton (Mr. Barnett), whose remarks on previous Clauses of the Bill have interested the Committee. I think that he would find that his hon. Friend would share the view of myself and my hon. Friends on this matter—that grouping is something which those who have to administer group companies very much want to have.
As to the argument about the preparation of accounts, I was very much intrigued by the suggestion which the hon. Member for Cheetham brought forward. This seems to be one way of surmounting the

difficulty, but surely the real answer to this is that groups of companies have to make up their accounts, anyway, in a reasonable time, in order to send printed accounts to the shareholders in time for the annual general meeting. Indeed, some of the major companies in the country now are doing this in an astonishingly short time.
The Chairman of I.C.I., Mr. Paul Chambers, at the last annual general meeting, himself referred to this, and I think that his staff deserves a pat on the back for having got the accounts to the shareholders within six weeks of the end of the financial year, for that was no mean achievement. I really cannot believe that the holding up of accounts is really an argument against grouping.
The Minister without Portfolio suggested that the provisions in the Bill for subvention payments were adequate, I would point out to him that though they are useful on occasion they are a bone of contention with accountants, who regard them as a confounded nuisance, because it is not until they have made up the accounts and find out what the position of the companies in the group is that, they make up the books to pay the subventions over. That is much more difficult than working out Corporation Tax for a group. Subvention payments have their uses, but are really a poor substitute for grouping.
Finally, I must express considerable disappointment that the Minister without Portfolio made no mention at all of the very real cases where hardship arises because of the absence of grouping. The Bill makes no provision for that sort of case and it is a very real drawback that it does not, because it will mean that companies will have substantially to modify, often at great inconvenience and possibly some cost, their company structure arrangements and adapt themselves to this tax which the Chief Secretary is never tired of telling us is simplicity in itself; not only simplicity, but, on occasions, injustice.
It seems to me that this is one of the ways in which we can modify the provisions which are written into the Bill and abolish some of the injustices which arise where things have worked perfectly fairly for decades under the taxes which the Bill is replacing.
I certainly hope that the Government will have another look at this Amendment about grouping, because it seems to me that it would be a very great advantage.

Mr. van Stranbenzee: I think that this is such an important matter that we really ought not just to pass the Clause without considering it seriously a little further, because whatever the Minister without Portfolio may say—I say this in no personal sense at all—I think that if he would look at what he said earlier in our discussions this afternoon he will find that his words are at least capable of the interpretation which my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) put upon them. It is for that reason that we on these benches picked up so quickly the points made earlier and so clearly explained by my hon. Friend.
I suppose that it can be said that there is an advantage in the discussion of this Amendment that the particular point made by the Minister, or thought to have been made by the Minister, has been cleared. I suppose that one can say that it is an advantage, but I thought that the Minister rested his case far too much upon objections which he believed to be in existence on the part of the professional advisers of these various groups of companies. I hope that he has had time for consultation about this, especially in view of the blistering attack made on this aspect of the matter by his hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever).
What I think the Minister has not had an opportunity of appreciating fully is that this is an optional procedure. There is no intention, if I may so loosely express it, of forcing it down the throats of the groups of companies concerned. In spite of what he said earlier—and this is a point made perfectly clear, and brought out very clearly, by the hon. Member for Cheetham—surely it is true that the procedure hitherto worked extraordinarily well, and very beneficially, on the whole, to individual companies. The Minister has had an opportunity for second thoughts, and it is much to be hoped that in the interests of groups he will feel able to say that in view of the weighty arguments which have been adduced from both sides of the Committee and in view of the voluntary nature of the procedure,

he feels that this is something which he can safely take back and look at again.

Mr. Barber: This has been a most unsatisfactory debate. After all, I think the whole Committee must agree that until this debate began we had made extraordinarily good progress thoughout today. All our debates have been businesslike and sensible. On occasions we have had to divide against the Government's proposals, and on other occasions Government spokesmen have said that they would look into a particular point.
I cannot understand the attitude of the Treasury Bench to this proposal. Indeed, when one considers all the speeches which have been made, including that of the hon. Member for Manchester, Cheetham (Mr. Harold Lever), they have all been quite clear that here is something which ought to be done in the interests of sound business administration. This is all we are asking for. Here is an opportunity for the Labour Government to show at long last that they are pro-business. But no, they threw the opportunity away.
If the Minister without Portfolio a quarter on an hour ago had only said that he would look at this proposal again, we could have disposed of this matter without a Division. We could have got on and could have been well on the way towards concluding our labours for the day. But we have had this extraordinarily rigid attitude. It is not as though the hon. Gentleman was sitting there alone. He has the Financial Secretary with him for consultation. He had the Chief Secretary with him, and even the Prime Minister popped in a moment ago to see what was going on. But no consultations took place.
I shall not weary the Committee by going over all the arguments, but I would say just this. Apart from the fact that the whole weight of the speeches has been in favour of the Amendments, it is also the case that all the arguments from the Minister without Portfolio against the proposal were based, as one of my hon. Friends said, on the assumption that this grouping arrangement was to be mandatory, whereas all we are asking is that a group of companies should have the option to be assessed in this particular way. In this respect, it is no good the Minister continuing to say "Oh,


well, we are doing away with Profits Tax. Therefore, anything concerned with Profits Tax is not relevant to Corporation Tax." The truth is that the simile is exact. The grouping arrangements for Profits Tax, as far as I know, have worked perfectly well and there is no reason to think that the same principle should not be applied to Corporation Tax.
None of the hon. Gentleman's arguments were at all convincing in the light of the very sensible and moderate arguments of my hon. Friends. Certainly there is not a member of the Committee who has spoken in support of the Minister, and in those circumstances it must be obvious to the whole Committee, even to those who have not spoken, that the only decent and sensible thing to do is to divide the Committee.

Mr. Joel Barnett: I cannot understand the attitude of my hon. Friend the Minister without Portfolio. I do not wish to give any joy to hon. Members opposite, but this is not a party political matter. I should have thought that there were so many arguments for group accounting as against separate accountancy that my hon. Friend would have appreciated the

point. From an economic point of view, from an efficiency point of view, from an accountancy point of view—from every conceivable point of view that I can think of—I would prefer to see group accounting. I should have thought that most people dealing with them would have preferred to see the preparation of accounts on a group basis.

I cannot understand talk about this as a means of tax avoidance, because there are much greater loopholes for avoidance by the use of separate accountancy procedures than by group accountancy. It is better to take a look at a set of accounts of a group of companies if only for the benefit of people who do not understand separate accounts—and there are a "few" people who do not understand even the way in which the most efficient sets of accounts are prepared.

Group accountancy is something which we should encourage. I should have thought that this was a proposal which my hon. Friend could accept, and I hope that he will look at it again.

Question put, That those words be there added:—

The Committee divided: Ayes 164, Noes 172.

Division No. 170.]
AYES
[10.36 p.m.


Alison, Michael (Barkston Ash)
Cooper, A. E.
Hamilton, M. (Salisbury)


Allan, Robert (Paddington, S.)
Corfield, F. V.
Harris, Reader (Heston)


Allason, James (Hemel Hempstead)
Craddock, Sir Beresford (Spelthorne)
Harrison, Brian (Maldon)


Awdry, Daniel
Crawley, Aidan
Harvey, John (Walthamstow, E.)


Baker, W. H. K.
Crowder, F. P.
Harvie Anderson, Miss


Barber, Rt. Hon. Anthony
Curran, Charles
Hastings, Stephen


Barlow, Sir John
Dance, James
Hawkins, Paul


Batsford, Brian
Davies, Dr. Wyndham (Perry Barr)
Hay, John


Bennett, Dr. Reginald (Gos &amp; Fhm)
d'Avigdor-Goldsmid, Sir Henry
Heald, Rt. Hn. Sir Lionel


Berry, Hn. Anthony
Dean, Paul
Heath, Rt. Hn. Edward


Bessell, Peter
Deedes, Rt. Hn, W. F.
Higgins, Terence L.


Biffen, John
Douglas-Home, Rt. Hn. Sir Alec
Hill, J. E. B. (S. Norfolk)


Biggs-Davison, John
Drayson, G. B.
Hirst, Geoffrey


Birch, Rt. Hn. Nigel
Eden, Sir John
Hobson, Rt. Hn. Sir John


Black, Sir Cyril
Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Hogg, Rt. Hn. Quintin


Bowen, Roderic (Cardigan)
Eyre, Reginald
Hooson, H. E.


Box, Donald
Fell, Anthony
Hopkins, Alan


Boyd-Carpenter, Rt. Hn. J.
Foster, Sir John
Hordern, Peter


Boyle, Rt. Hn. Sir Edward
Fraser, Ian (Plymouth, Sutton)
Howe, Geoffrey (Bebington)


Braine, Bernard
Gammans, Lady
Hunt, John (Bromley)


Brinton, Sir Tatton
Gardner, Edward
Iremonger, T. L.


Bromley-Davenport,Lt.-Col.Sir Walter
Gibson-Watt, David
Irvine, Bryant Godman (Rye)


Brooke, Rt. Hn. Henry
Giles, Rear-Admiral Morgan
Jenkin, Patrick (Woodford)


Bruce-Gardyne, J.
Gilmour, Sir John (East Fife)
Johnson Smith, G. (East Grinstead)


Buck, Antony
Glover, Sir Douglas
Johnston, Russell (Inverness)


Butcher, Sir Herbert
Goodhart, Philip
Kimball, Marcus


Buxton, Ronald
Goodhew, Victor
Kirk, Peter


Campbell, Gordon
Grant, Anthony
Lancaster, Col. C. G.


Carlisle, Mark
Grant-Ferris, R.
Langford-Holt, Sir John


Carr, Rt. Hn. Robert
Gresham Cooke, R.
Lewis, Kenneth (Rutland)


Chataway, Christopher
Grieve, Percy
Litchfield, Capt. John


Chichester-Clark, R.
Griffiths, Eldon (Bury St. Edmunds)
Longbottom, Charles


Clark, Henry (Antrim, N.)
Griffiths, Peter (Smethwick)
Longden, Gilbert


Clark, William (Nottingham, S.)
Curden, Harold
Loveys, Walter H.


Clarke, Brig. Terence (Portsmth, W.)
Hall, John (Wycombe)
Lubbock, Eric


Cooke, Robert
Hall-Davis, A. G. F.
Mackenzie, Alasdair (Ross&amp;Crom'ty)




McLaren, Martin
Pitt, Dame Edith
Thompson, Sir Richard (Croydon,S.)


McMaster, Stanley
Price, David (Eastleigh)
Thorpe, Jeremy


Mawby, Ray
Pym, Francis
Turton, Rt. Hn. R. H.


Maxwell-Hyslop, R. J.
Quenneli, Miss J. M.
van Straubenzee, W. R.


Meyer, Sir Anthony
Redmayne, Rt. Hn. Sir Martin
Vaughan-Morgan, Rt. Hn. Sir John


Mitchell, David
Rees-Davies, W. R.
Vickers, Dame Joan


More, Jasper
Renton, Rt. Hn. Sir David
Walder, David (High Peak)


Morrison, Charles (Devizes)
Ridsdale, Julian
Walker, Peter (Worcester)


Munro-Lucas-Tooth, Sir Hugh
Roberts, Sir Peter (Heeley)
Ward, Dame Irene


Neave, Airey
Russell, Sir Ronald
Weatherill, Bernard


Nicholls, Sir Harmar
Scott-Hopkins, James
Wells, John (Maidstone)


Nicholson, Sir Godfrey
Sharples, Richard
Whitelaw, William


Noble, Rt. Hn. Michael
Shepherd, William
Wills, Sir Gerald (Bridgwater)


Onslow, Cranley
Sinclair, Sir George
Wise, A. R.


Page, John (Harrow, W.)
Stanley, Hn. Richard
Wood, Rt. Hn. Richard


Page, R. Graham (Crosby)
Stoddart-Scott, Col. Sir Malcolm
Younger, Hn. George


Pearson, Sir Frank (Clitheroe)
Talbot, John E.



Percival, Ian
Taylor, Sir Charles (Eastbourne)
TELLERS FOR THE AYES:


Peyton, John
Taylor, Frank (Moss Side)
Mr. MacArthur and


Pickthorn, Rt. Hn. Sir Kenneth
Teeling, Sir William
Mr. Dudley Smith.




NOES


Abse, Leo
Hamling, William (Woolwich, W.)
Paget, R. T.


Albu, Austen
Harper, Joseph
Palmer, Arthur


Allaun, Frank (Salford, E.)
Hattersley, Roy
Pargiter, G. A.


Alldritt, Walter
Hazell, Bert
Parkin, B. T.


Allen, Scholefield (Crewe)
Hobden, Dennis (Brighton, K'town)
Pavitt, Laurence


Armstrong, Ernest
Holman, Percy
Pearson, Arthur (Pontypridd)


Atkinson, Norman
Horner, John
Peart, Rt. Hn. Fred


Bacon, Miss Alice
Houghton, Rt. Hn. Douglas
Pentland, Norman


Bagier, Gordon A. T.
Howarth, Harry (Wellingborough)
Perry, Ernest G.


Barnett, Joel
Howell, Denis (Small Heath)
Prentice, R. E.


Benn, Rt. Hn. Anthony Wedgwood
Hughes, Emrys (S. Ayrshire)
Pursey, Cmdr. Harry


Bishop, E. S.
Hunter, A. E. (Feltham)
Redhead, Edward


Boston, T. G.
Hynd, H. (Accrington)
Rees, Merlyn


Boyden, James
Irvine, A. J. (Edge Hill)
Reynolds, G. W.


Braddock, Mrs. E. M.
Irving, Sydney (Dartford)
Rhodes, Geoffrey


Bradley, Tom
Jeger, George (Goole)
Richard, Ivor


Bray, Dr. Jeremy
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Roberts, Albert (Normanton)


Brown, Hugh D. (Glasgow, Provan)
Jenkins, Hugh (Putney)
Rodgers, William (Stockton)


Buchanan, Richard
Johnson, Carol (Lewisham, S.)
Rogers, George (Kensington, N.)


Butler, Herbert (Hackney, C.)
Johnson,James(K'ston-on-Hull,W.)
Rose, Paul B.


Butler, Mrs. Joyce (Wood Green)
Jones, Dan (Burnley)
Rowland, Christopher


Callaghan, Rt. Hn. James
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Shore, Peter (Stepney)


Carmichael, Neil
Jones, J. Idwal (Wrexham)
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C)


Carter-Jones, Lewis
Jones, T. W. (Merioneth)
Silkin, John (Deptford)


Chapman, Donald
Kellcy, Richard
Silkin, S. C. (Camberwell, Dulwich)


Corbet, Mrs. Freda
Kenyon, Clifford
Silverman, Julius (Aston)


Crawshaw, Richard
Kerr, Mrs. Anne (R'ter Chatham)
Skeffington, Arthur


Cronin, John
Kerr, Dr. David (W'worth, Central)
Slater, Mrs. Harriet (Stoke, N.)


Crosland, Rt. Hn. Anthony
Ledger, Ron
Small, William


Dalyell, Tam
Lee, Miss Jennie (Cannock)
Smith, Ellis (Stoke, S.)


Darling, George
Lever, Harold (Cheetham)
Storehouse, John


Davies, Harold (Leek)
Lipton, Marcus
Strauss, Rt. Hn. G. R. (Vauxhall)


Davies, Ifor (Gower)
Lomas, Kenneth
Summerskill, Hn. Dr. Shirley


Dell, Edmund
Loughlin, Charles
Swingler, Stephen


Diamond, John
McCann, J,
Taylor, Bernard (Mansfield)


Dodds, Norman
MacColl, James
Thomas, George (Cardiff, W.)


Donnelly, Desmond
Mclnnes, James
Thomas, Iorwerth (Rhondda, W.)


Driberg, Tom
Mackie, John (Enfield, E.)
Thornton, Ernest


Duffy, Dr. A. E. P.
Mallalieu,J.P.W.(Huddersfieia,E.)
Tinn, James


Dunnett, Jack
Mason, Roy
Tuck, Raphael


English, Michael
Mayhew, Christopher
Varley, Eric G.


Ensor, David
Mellish, Robert
Wainwright, Edwin


Evans, Albert (Islington, S.W.)
Mikardo, Ian
Walden, Brian (All Saints)


Evans, Ioan (Birmingham, Yardley)
Mitlan, Bruce
Walker, Harold (Doncaster)


Fletcher, Sir Eric (Islington, E.)
Molloy, William
Wallace, George


Fletcher, Ted (Darlington)
Monslow, Walter
Watkins, Tudor


Fletcher, Raymond (Ilkeston)
Morris, Alfred (Wythenshawe)
Weitzman, David


Floud, Bernard
Morris, John (Aberavon)
Wells, William (Walsall, N.)


Foley, Maurice
Mulley,Rt.Hn.Frederick(SheffieldPk)
White, Mrs. Eirene


Foot, Sir Dingle (Ipswich)
Murray, Albert
Whitlock, William


Freeson, Reginald
Newens, Stan
Wigg, Rt. Hn. George


Galpern, Sir Myer
Noel-Baker, Francis (Swindon)
Wilkins, W. A.


Ginsburg, David
Norwood, Christopher
Williams, Mrs. Shirley (Hitchin)


Gourlay, Harry
Ogden, Eric
Williams, W. T. (Warrington)


Gregory, Arnold
O'Malley, Brian
Wilson, Rt. Hn. Harold (Huyton)


Grey, Charles
Oram, Albert E. (E. Ham, S.)
Wyatt, Woodrow


Gunter, Rt, Hn. R. J.
Orme, Stanley



Hale, Leslie
Page, Derek (King's Lynn)
TELLERS FOR THE NOES:




Mr. Fitch and Mr. Howie.

Question proposed, That the Clause stand part of the Bill.

10.45 p.m.

Mr. McMaster: Sir Harry—[Laughter.]

The Temporary Chairman (Sir Harry Legge-Bourke): Order. I must ask the Committee to allow the hon. Member who has been called by the Chair to be heard.

Mr. Ivor Richard: On a point of order. Is it in order for the hon. Gentleman to frighten us so badly?

The Chairman: I am afraid that the remark of the hon. Member was not audible to the Chair.

Mr. McMaster: I apologise to hon. Members if I do frighten them. The Amendment designed to alleviate the effect of the Bill on shipping did not receive a favourable reception from the Minister without Portfolio. Now that the Chancellor of the Exchequer and the Minister of Shipping are here, I ask them to put their heads together, because they have shown within the past week that they have some sympathy with the position of shipowners.
Clause 47(1) provides that Corporation Tax is payable on profits which are earned abroad and which cannot be remitted to this country. Would the Chancellor consider amending the Clause on Report so that the same provisions apply in respect of the Clause as apply in respect of Clause 36? Shipowners earn their profits all over the world. In certain places they are not able to remit the profits to Britain. It has been accepted in relation to Clause 36 that capital gains which cannot be remitted to this country should not be subject to Capital Gains Tax. The same provision might well be extended to apply to Corporation Tax when profits earned abroad cannot be remitted to this country.

Mr. William Clark: As I read subsection 3(c), the effect will be to cause the end of an accounting period if any trade within the group is discontinued or commenced. This obviously cannot be the object of the subsection. It would have a far-reaching effect if the cessation of

any part of a trade carried on by a company—it may have four or five different trades—stopped one of those trades, and changed the accounting period. From an accountancy and fiscal point of view, this would have a detrimental effect on the company accounting of many companies. I should like the Chancellor to assure us on this point now, or to bring the matter back on Report.

Sir Eric Fletcher: This is a highly technical point, and I certainly undertake to consider it between now and Report.
With regard to the observations of the hon. Member for Belfast, East (Mr. McMaster), I am not sure whether he was here when I spoke, but I thought that I gave a sympathetic reply to the representations that were made by the hon. Lady the Member for Tynemouth (Dame Irene Ward) and other hon. Members on behalf of the shipping industry. The Government are most anxious to help the shipping industry in every way they can, and we are considering whether anything can be done within the context and framework of this Bill in that regard.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 48.—(ALLOWANCE OF CHARGES ON INCOME.)

Mr. William Clark: I beg to move Amendment No. 286, in page 58, line 11, after "company", to insert:
save as is hereinaftecr provided".
This is a paving Amendment for the subsequent Amendments, which I understand it will be convenient to discuss with this one, namely, Amendment No. 287, in page 58, line 27, at end insert:
(c) any dividends in respect of preference shares with cumulative dividends rights in the capital of the company.
and Amendment No. 288, in Clause 83, page 113, line 39, at end insert:
(h) "preference shares" means the issued share capital of a company the holders whereof have a right to a dividend at a fixed rate or at a rate fluctuating in accordance with the standard rate of income tax, but have no other right to share in the profits of the company".

The Temporary Chairman: That is correct. These two Amendments may be discussed at the same time.

Mr. Clark: They are inter-connected, and the question here is what should be allowable as a charge? The Amendments suggest that where there are cumulative preference shares these should be an allowable charge for Corporation Tax. The Chief Secretary realises that if it were debenture interest it would be an allowable charge, and perhaps I might ally cumulative preference dividends to debenture interest.
The reason why we refer to cumulative preference dividends in our Amendment is that this avoids the nonsense which one could have of cumulative preference dividends at, say, 50 per cent. or 70 per cent., and so on. If they are cumulative preference shares, the hon. Gentleman will appreciate that this means that the company has a continuing liability for the dividend.
We are not wedded to the wording of the Amendment. It may be that another stipulation is needed in it, such as that it should be at a reasonable commercial rate of interest. We would not object to that. Much of the financing of companies throughout the country—I am not speaking about equity capital—is done either by loan capital in the case of debenture interest, or by cumulative preference shares at a reasonable rate of interest. I ask the hon. Gentleman to give this matter sympathetic consideration because this is of major importance from the point of view of financing companies. If the hon. Gentleman cannot give an immediate reply, I hope that he will undertake to consider the matter sympathetically between now and Report.

Mr. Diamond: I am in a position to give an immediate reply, and to give the same reply which was given by right hon. Gentlemen opposite during the 13 years when they had to consider this problem, arid which the Royal Commission had to consider, namely, whether preference shares are share capital, or whether they are a charge on a company, like debenture capital. The Royal Commission considered it and came out clearly in paragraph 522, saying that preference dividends
are not a charge against profits; they are in every sense a distribution of profit to one class of proprietors.
This is a thoroughly well-established principle, which was challenged in the time of the Labour Government in 1945–

51 by the then Opposition, and challenged again, time after time, when the Conservatives came to power. But they left it, for Profits Tax purposes, in a sensible way, as a distribution of profits. Profits Tax rose to 30 per cent.—and we are now talking about a Corporation Tax of 35 per cent.—and what did right hon. and hon. Gentlemen opposite do when Profits Tax was at 30 per cent.? They continued to apply their intelligence to these matters and left this as a distribution of profits and not a charge against profits.
I would weary the Committee if I attempted to give it the full range of differences between the rights of debenture holders and the rights of shareholders, be they preference shareholders, ordinary shareholders or deferred shareholders. Those rights are totally different and distinct from the rights of debenture holders.
In those circumstances, I invite the Committee to have regard to the most authoritative and clear statement of the Royal Commission, and to the good sense which prevailed for 13 years, when the same problems were considered against the background of a Profits Tax of 30 per cent. I invite them to reconsider this matter and not to press the Amendment to a Division.

Mr. Lubbock: I cannot resist the opportunity of saying that the Chief Secretary is right, for once. But I would draw the Committee's attention to the possibility that companies which have preference shares could go to the courts and redeem them and replace them by some kind of secured or unsecured loan, and thereby deduct the interest from their profits obtained before taxation. I would point out that a great many companies with this type of capital structure will be doing this in the near future.

Mr. Patrick Jenkin: The fact that the hon. Member for Orpington (Mr. Lubbock) has agreed with the Chief Secretary convinces me that I am right. The arguments put forward by the Chief Secretary are wrong, because this is a matter of degree. In the case of the 30 per cent. Profits Tax we were talking about net preference dividends after tax; here we are talking about gross preference dividends to be taken after a 40 per cent. Corporation Tax. We are getting to the point where the burden on


ordinary shareholders' funds and the ordinary equity of a company—because of the need to pay preference dividends—becomes very severe. It is the ordinary shareholder who will pay tax on the preference shareholder's dividend.
That is the effect of this provision. Unless the Amendment is accepted it will mean that in the case of some companies with a high yield of preference share capital there will be nothing for the ordinary shareholder. Take the case of the John Lewis Partnership, where the preference shareholders are those in the family business, and the ordinary shareholders are the people who work in the business. The differential rate of Profits Tax was a severe burden on that company, which was an excellent example of co-partnership. I should have thought that the hon. Member for Orpington would have recognised that it was an excellent example. The differential rate of Profits Tax, as it used to be, placed a severe penalty on that company, and it could do nothing about it. This will hit it harder. The Chief Secretary should recognise this fact and agree to reconsider the point.

Mr. Harold Lever: There may be good reasons for retaining this, but they are not those advanced by the hon. Member for Orpington (Mr. Lubbock). Serious practical inconveniences would result if companies with preference capital had to go to court and redeem it and afterwards had to go to an often unreceptive market to get loan capital to replace it. That will not do for an answer.
I am sad to see the disappearance of a particular form of financing. I should have thought that there was mutual agreement between parties in cases where companies finance themselves. I keep desperately trying to remove this argument from the realm of party politics. Party-politically it is neutral in the case of companies which have preference shares or loan capital, so it is rather a pity that they should not be allowed to have them.

11.0 p.m.

Mr. Diamond: I am sorry to interrupt but I thought I heard my hon. Friend say it is a pity that they should not be

allowed to have them. No one is stopping them having them. I agree with him that this is not a partisan issue. It is merely a recognition of the facts of life.

Mr. Lever: I was pausing to catch my breath at the wrong moment—not a natural break, as they say on commercial television. I was going to say, with the Government penalising one form of capitalisation and not another, unless there is some very good reason why the Government would rather the companies operated on loan stock than on preference stock—but I hate to sound like the Treasury Front Bench.
I must tell the Chief Secretary that it would be absolutely right to say that there is no analogy between Profits Tax and the Corporation Tax, a theme we have heard from time to time on almost every Amendment. This is the one occasion where one can say with great emphasis that there is no relationship whatever between Profits Tax and this tax. Much more important is the analogy with Income Tax rather than with Profits Tax, because I believe that a minor injustice used to be worked upon preference shares by the system, when they were normally helped a good deal by the Income Tax provisions. So it was a relatively minor injustice, although my hon. Friend, with a respect for the venerable condition of our tax system, which has not always been in evidence, and rightly so, points to the 30 or more years in which we have operated this system in relation to Profits Tax.
If venerability is the case, we have operated the reverse system in relation to Income Tax for even more years than that. The venerability is not necessarily a matter that commends itself. In this connection the fact is that the Tory Party, both as Opposition and as Government, have taken the same view that the Chief Secretary now takes. I am not going to press this matter further, but it seems to me that, with due safeguards having been taken, it is a matter of supreme difference to me whether a company raises its capital by preference shares or by loan capital. As far as the Government are concerned, they ought not, in my respectful submission, to be partisan to either method. They should leave it to the company to choose the method with the same fiscal consequences in each case.
it is no good saying that the choice is being left to them. We do not actually lock company directors up if they raise money by preference capital, but we make it rather expensive for them to do so. I know that this is not an easy question, bedevilled by much support from the Conservative Party. My hon. Friend the Chief Secretary may be embarrassed about the number of Conservative arguments that have taken exactly the same position as he takes tonight. I want to relieve him of his embarrassment and urge that, while rejecting this Amendment, the terms of which are not satisfactory, for the hour is late, he should give some thought to the matter to see if there is some way in which we can preserve the right of companies to have this flexibility in the manner in which they have traditionally raised capital for their lawful business occasions.

Amendment negatived.

Sir John Hobson: I beg to move Amendment No. 513, in page 59, line 16, after "138(1,a)" to insert "and(c)"
The oddity of the drafting is that by adding (c) one actually achieves the result of removing (b), but this is a subtlety I can perhaps explain, along with the consequences. This question raises a matter of some importance, particularly to many of the larger oil companies and the larger trading companies. They do raise, and increasingly are raising, loan capital by means of public issues, particularly overseas, on the continent of Europe. For the most part, such money is raised upon an unsecured basis. Undertakings are given that they will not, if they raise any further loan, give any better security to the subsequent loan than the existing loan which is granted. Apart from that, it is usually a straight, unsecured loan, arid they are able to borrow the money from an overseas lender without charging their assets, either in this country or overseas. The contracts are almost invariably the subject of foreign law and the United Kingdom borrowing company has in such circumstances up till now always been able to pay its interest gross and yet secure United Kingdom tax relief on the payment of such interest. The contract almost invariably provides that the interest shall be paid gross; that is,

that it should be free of present and future United Kingdom tax.
The consequences of the Bill appear to be that this opportunity will be removed for the future. Admittedly, the next Amendment which the Chancellor proposes would seem to bring into operation Section 132(1,c) of the Income Tax Act, 1952, but that, of course, applies and is useful only in the case of income not received in the United Kingdom. In those circumstances, there can be a deduction on account of the annual interest payable out of income to a person resident outside the United Kingdom, but the consequences of Clause 50(6), which seems to introduce Case 1 for the basis of assessment, would seem to remove any prospect in any event of relief under Section 132 of the 1952 Act.
In addition, there is the case of profits or gains of a trade which is carried on in the United Kingdom by a United Kingdom resident, the income of which is actually received in the United Kingdom. The annual interest charged for money borrowed unsecured overseas for the furtherance of such trade can be treated as a charge for the purpose of Corporation Tax under the Bill as it stands only if all the requirements of Section 138 of the 1952 Act are specified. These are very stringent indeed and, in practice, almost impossible to fulfil. The one which causes particular difficulty is Section 138(1,b), which requires that the interest payments should be in respect of a security mainly in respect of assets outside the United Kingdom.
Many of the large British companies are, in fact, United Kingdom parent companies of a group which do not themselves have any foreign assets. They do not themselves own or employ any assets outside the United Kingdom, and, of course, loans are unsecured in any event. And even if they had assets outside the United Kingdom, we are now talking about unsecured loans and, to that extent, Section 138(1,b) causes a difficulty which prevents a deduction of the interest charges on such loans.
The result is that, as the Bill is drawn, if one must fulfil all the conditions of Section 138(1), including Section 138(1,b), such United Kingdom companies will be effectively precluded from borrowing on the Continent. It cannot


be the intention of Her Majesty's Government to make it more difficult, if not wholly impossible, for United Kingdom companies with overseas interests to borrow abroad when it is commercially and financially justified. Least of all can it be the intention of the Government to insist that United Kingdom borrowers must give security in support of borrowing abroad on their overseas assets when the lenders are perfectly prepared to give them the loans without any security at all in the United Kingdom.
For these reasons, while there may be other ways of dealing with the matter, I hope that the Chief Secretary—who I see nodding in understanding of the problem, though I know not with what results—will assure such companies which are anxious about this matter that the Government will either accept the Amendment or that some other method will allow the interest on unsecured loans raised on the Continent to be set off against income arising in this country for the purposes of Corporation Tax.

Mr. Diamond: The right hon. and learned Gentleman the Member for Warwick and Leamington (Sir J. Hobson) has made the point with the clarity and persuasiveness one would expect, and has demonstrated that what the Amendment seeks to do is to remove the restrictive effect of Section 138 (1, b). The proposal in the Bill as it stands is to incorporate the existing restrictions from the Income Tax provisions, and my right hon. Friend feels that these restrictions, although they have been within the standard code for so long, are too restrictive, and he would wish to accede, in general terms, in principle, to the views put forward by the right hon. and learned Gentleman.
There is, however, one reason why I cannot, at this moment, accept the wording of the Amendment. It is simply that I do not think that the Amendment goes far enough. Other representations are being made in a very special case which I feel my right hon. Friend might well want to meet at the same time. If, therefore, the right hon. and learned Gentleman would feel disposed, on that very clear undertaking, to withdraw the Amendment, we would undertake to introduce an Amendment on Report that would fit the circumstances so admirably

described by him, and perhaps go a little wider as well.

Sir J. Hobson: I immediately express my gratitude to the Chief Secretary for his attitude, and assure him that I would never be wedded to my own drafting. I have no doubt that, if not the hon. Gentleman himself, at least the total resources of the Government in drafting something to cover not only this case, but other cases, will be perfectly acceptable. I am grateful to him for his assurance, and beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Diamond: I beg to move Amendment No. 339, in page 59, line 19, at the end to insert:
or
(c) the payment is one payable out of income brought into charge to tax under Case IV or V of Schedule D".
This Amendment has been tabled to remedy an inadvertent omission from subsection (5). There are two methods by which relief of a kind given under the Clause is provided, and I need not detain the Committee with them, but a third method has been overlooked. That is the method of setting against tax under Case IV or V of Schedule D income from overseas, and the Amendment would add that further relief.

A mendment agreed to.

Mr. Patrick Jenkin: I beg to move Amendment No. 551, in page 59, line 24, at the end, to add:
(7) Notwithstanding anything hereinbefore contained where a company receives any interest, whether yearly or for any shorter period, or any annual payment from another company (both being resident in the United Kingdom), and either

(a) the company paying the interest or annual payment is a subsidiary of the other or of a company so resident of which the other is a subsidiary; or
(b) the business of the company paying the interest or annual payment consists wholly or mainly of the carrying on of a trade or trades and three-quarters or more of the ordinary share capital of that company is owned between them by five or fewer companies, of which the company receiving the interest or annual payment is one and of which none owns less than one-tenth of that capital;

then the company receiving the interest or annual payment and the company paying the interest or annual payment may jointly elect


that this subsection shall apply to the interest or annual payment received from the latter by the former, and so long as the election is in force any such interest or annual payment shall be paid gross and not under deduction of income tax but shall be treated as a charge on income provided that it would so qualify but for the fact that it is paid gross and not under deduction of income tax.
(8) Subsection (7) above shall apply to the whole or such proportion of such interest or annual payment as the companies receiving and paying the same may jointly specify from time to time.
Although this is a very important Amendment, and I hope that the Government will treat it as such, I can deal with it very briefly. We have discussed provisions already in the Bill for grouping for the payment of dividends, and we sought to amend them. This Amendment seeks to apply to interest and other annual payments the same provision for grouping as the Bill already provides for dividends. It appears to me essential that the same treatment should be extended, otherwise the mere fact of the organisation of groups of companies and consortia will affect the liability to account to the Revenue for tax deducted for annual payments.
One would comment that the position would be that the groups would be making what are tantamount to interest-free loans of tax to the Inland Revenue. I submit that that is undesirable, and that in principle there is no difference at all for this purpose between distributions—dividend payments, and so on—and annual payments other than distributions. We shall later see that in the machinery provisions in the Schedule these are dealt with together in the same paragraphs all the way through.
11.15 p.m.
I submit that grouping for interest and other annual payments is a perfectly reasonable and fair provision which could be introduced into the Bill and I hope very much that the hon. Gentleman will accept the Amendment.

Mr. Diamond: The hon. Gentleman would riot wish me to read out the four reasons why the Amendment as drafted is not adequate. I am sure that he would not wart to detain the Committee. The new arrangement, as he said, is somewhat different from the present arrangement and is assimilated closely to dividends. That is to say, tax is deducted at source

and accounted for very much in the same way as Pay As You Earn and there is an advantage to the Inland Revenue in that there would be some acceleration of the payment of tax.
In the seat in which I am sitting, I find that not a wholly objectionable occurrence. I would not wish to forgo for the Government and the nation the advantage of the taxpayer paying tax a little earlier than he does now.
I appreciate that, where there is a payment that creates a grouping or a family, as it were, there would perhaps be inconvenience, although I would not say hardship. But there would be results which would not arise if groups were more closely connected and run under one company, taking money out of the left hand pocket and putting it into the right hand pocket.
For technical reasons, the Amendment is unsatisfactory and, for Treasury reasons, I would wish to encourage the payment of tax more quickly. I think, however, that the hon. Gentleman has made a valid point and if he will withdraw the Amendment I will undertake to look at the matter. I am not undertaking to bring in an Amendment to meet the point, but I am undertaking to look at it to see whether we can do anything to help him. I think that there is a valid point here, and I have given the argument both ways. Therefore, I hope that the hon. Gentleman will withdraw his Amendment.

Mr. Patrick Jenkin: I am grateful to the hon. Gentleman for what he has said, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause, as amended, ordered to stand part of the Bill.

Clauses 49 and 50 ordered to stand part of the Bill.

Mr. Diamond: I beg to move,
That the Chairman do report Progress and ask leave to sit again.
I think that this is an occasion for all of us, for our minds are on our constituencies and the relaxation which our constituents desire us to have. We have made extraordinarily good progress, and I am most grateful to all hon. Members who have contributed to the discussion


and, above all, I thank them for their brevity.

Mr. Heath: We find ourselves in a very happy position, and, as the Chief Secretary has said, we have made very good progress. The debate has been remarkable in that the Chief Secretary has asked us to withdraw an Amendment on the ground, not that it goes too far but that it does not go far enough. The hon. Member for Manchester, Cheetham (Mr. Harold Lever) has completely convinced himself that the whole of the debates on the Finance Bill are nonparty and that he can freely take part. The Chief Secretary has paid what I may describe as a richly-earned tribute to the last Administration by saying that it governed wisely and well for 13 years.
As we are at the point where, when we resume, we start fairly promptly on the major subject of investment allowances, this is a suitable moment to accept the Motion that the Chief Secretary moved in such felicitous terms. He had his Treasury colleagues and the rest of the Administration can now embark on a recess, which, however short, they desperately require.

Question put and agreed to.

Committee report Progress; to sit again tomorrow.

FINANCE [MONEY] (No. 2)

Considered in Committee under Standing Order No. 88 (Money Committees).—[Queen's Recommendation signified.]

[Sir SAMUEL STOREY in the Chair]

Resolved,
That if any Act of the present Session relating to Finance authorises the making to companies of payments out of moneys provided by Parliament with a view to offsetting increases in the total taxation charged on trading income of the company and dividends paid by the company, being payments calculated by reference to reductions in the credit allowed to the company for overseas taxation, the Act may in that connection provide specially for companies which have been overseas trade corporations by treating them as if they had never been overseas trade corporations and relating the payments to rates of credit for foreign tax artificially arrived at.—[Mr. Callaghan.]

Resolution to be reported.

Report to be received Tomorrow.

FINANCE (No. 2) BILL

Motion made, and Question proposed,
That, notwithstanding the practice of the House, notices of Amendments to the Finance (No. 2) Bill as amended in Committee, or of new Clauses or new Schedules, to be proposed on consideration of the Bill, may be received before the Bill has been reported.—[Mr. Callaghan.]

11.22 p.m.

Mr. Edward Heath: If I understand the position rightly, I think that this Motion arises out of the arrangement which the Chancellor of the Exchequer has been kind enough to make for the reprinting—

Mr. Deputy-Speaker (Dr. Horace King): Order. The Motion before the House is not exempted business. If the right hon. Gentleman wishes to debate it it must be put down for another day. He would, however, be in order in asking a question.

Mr. Heath: Thank you, Mr. Deputy-Speaker. Do I understand correctly that this arises from the reprinting of the first three Parts of the Bill and that it will enable us to put down new Clauses or Amendments or new Schedules? May I presume that this will not in any way curtail the normal period that we may expect between the end of the Committee stage and the beginning of the Report stage?

The Chancellor of the Exchequer (Mr. James Callaghan): Yes, Sir. I am obliged to the right hon. Member for Bexley (Mr. Heath) for making the suggestion, which had not occurred to me, that we might reprint these early Parts of the Bill. May I also express the thanks of both sides of the House to the authorities of the House for facilitating this possibility? It will now be possible to reprint them immediately after Whitsun.
The only difficulty, if it be a real difficulty, is that any new Clauses which affect the first three Parts which might be passed at the end of our consideration of the Bill in Committee will, of course, not be included in the reprint. But this should not be an insuperable problem, and we shall, I think, find our work


much facilitated. I am grateful to the right hon. Gentleman for his proposal, which this Motion will put into effect.

Question put and agreed to.

ADJOURNMEND.

Resolved, That this House do now adjourn.—[Mr. Fitch.]

Adjourned accordingly at twenty-five minutes past Eleven o'clock.